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Cash Flow: The movement of cash into and out of a company over a specific period of time.
Cash Flow refers to the movement of cash into and out of a company over a specific period of time, typically a month, quarter, or year. Cash flow is an important financial metric that indicates how much cash a company has available to pay its debts, expenses, and investments.
Cash flow can be broken down into three main categories: operating cash flow, investing cash flow, and financing cash flow.
Operating cash flow refers to the cash flow generated by a company's core business operations, such as the sale of goods or services. This is the cash flow that a company relies on to fund its day-to-day operations, including paying suppliers, employees, and other expenses.
Investing cash flow refers to the cash flow associated with the purchase or sale of long-term assets, such as property, equipment, or investments. This type of cash flow is important for funding future growth and expansion, but it can also be a significant drain on a company's cash reserves.
Financing cash flow refers to the cash flow associated with the company's financing activities, such as the issuance of debt or equity. This type of cash flow can be used to pay dividends, buy back shares, or repay debt, and can have a significant impact on a company's overall financial health.
A positive cash flow means that a company is generating more cash than it is spending, which can indicate financial stability and growth potential. Conversely, a negative cash flow means that a company is spending more cash than it is generating, which can indicate financial strain and potential issues with liquidity.
Overall, cash flow is an important metric that provides insight into a company's financial health and ability to meet its financial obligations. Businesses and investors often closely monitor cash flow and use it to make informed decisions about investing, financing, and overall business strategy.