What is cash flow?

Cash flow is the net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing, while negative cash flow indicates that a company's liquid assets are decreasing.

Positive cash flow

A company has positive cash flow when its cash inflows exceed its outflows. Positive cash flow is an important indicator of a company's financial health, as it indicates that the company is able to generate enough cash to cover its expenses and maintain its operations.

Negative cash flow

The opposite is true with negative cash flow. A company has negative cash flow when its cash outflows exceed its inflows. Negative cash flow indicates that the company is not generating enough cash to cover its expenses and maintain its operations. This can lead to a number of financial problems for a company, such as defaulting on loans, difficulty paying employees, and ultimately bankruptcy.

Ways to improve cash flow

There are a number of ways to improve positive cash flow, including:

  • Reducing operating expenses
  • Decreasing inventory levels
  • Obtaining financing

Ways to reduce negative cash flow

  • Increasing sales
  • Decreasing payables
  • Obtaining financing


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