Cash flow is a measure of changes in a company's cash account during an accounting period, specifically its cash income minus the cash payments it makes.
For example, if a car dealership sells $100,000 worth of cars in a month and spends $35,000 on expenses, it has a positive cash flow of $65,000. But if it takes in only $35,000 and has $100,000 in expenses, it has a negative cash flow of $65,000.
Investors often consider cash flow when they evaluate a company since without adequate money to pay its bills, it will have a hard time staying in business.
You can calculate whether your personal cash flow is positive or negative the same way you would a company's. You'd subtract the money you receive (from wages, investments, and other income) from the money you spend on expenses (such as housing, transportation, and other costs).
If there's money left over, your cash flow is positive. If you spend more than you have coming in, it's negative.
- Browse Related Terms: Account History, Appraisal, Average daily balance, Billing Date, Cash basis accounting, Cash Flow, Credit History, Credit Repair Organization, Grace Period, Minimum finance charge, Periodic rate
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