If you’ve ever been in business, you’ve heard the term cash flow. Cash flow refers to the net balance of cash moving in and out of the business for a specific period. It can be positive or negative.
What does Cash Flow mean in accounting terms?
Money is constantly moving in and out of the business. When a retailer purchases something, cash moves out of business, and when customers shop and spend their money, cash moves back into the business. Cash flow can be positive or negative. Positive cash flow means that the company is pulling in more money than it’s losing. Negative cash flow means the company is losing more money than it is pulling in.
Cash flow can also be divided into three major categories. There is operating cash flow, investing cash flow, and financing cash flow. Operating cash flow is the net cash that a company generates from normal business operations. It is required for business growth. Investing cash flow is generated from a company’s investment-related activities. This number will often be negative. Finally, there is financing cash flow, and it refers to money moved between companies and their investors.
Cash flow is documented with a cash flow statement, and this statement allows investors to understand how company operations are running. Especially if you’re interested in applying for a business loan, cash flow statements can be necessary to show that your business is on solid standing.
Money is constantly moving through your business, and this process is called cash flow. Cash flow can be positive or negative. Positive cash flow means that you’re moving more money into your business than is going out, and negative is the opposite. If you’re interested in getting a loan, your cash flow statement will be important to lenders. At Aspen commercial lending, we have plenty of ways to help businesses manage their cash flow and options to help with financing.