Description: Cash flow refers to the total amount of money transferred in and out of a business over a specific period. This concept is fundamental to financial management, as it allows companies to assess their liquidity, solvency, and ability to meet financial obligations. A positive cash flow indicates that a company is generating more money than it spends, which is essential for its growth and sustainability. Conversely, a negative cash flow can signal financial problems, potentially leading the company to insolvency if not managed properly. Cash flow is generally classified into three categories: operating cash flow, which comes from the core activities of the business; investing cash flow, which relates to the purchase and sale of assets; and financing cash flow, which includes transactions related to obtaining and repaying debt and equity. Effective cash flow management is crucial for financial planning and strategic decision-making, as it provides a clear view of the company’s financial health and its ability to invest in future opportunities.
