What is Cash Flows ?

hi

Cash flow is the total amount of money being transferred into and out of a business, especially as affecting liquidity.....

Cash is coming in from customers or clients who are buying your products or services. If customers don't pay at the time of purchase, some of your cash flow is coming from collections of accounts receivable......

Think of 'cash flow' as a picture of your business checking account. If more money is coming in than is going out, you are in a "positive cash flow" situation and you have enough to pay your bills.....

Lack of cash is one of the biggest reasons small businesses fail.....

Dealing with cash flow issues is most difficult when you are starting a business. You have many expenses and money is going out fast. And you may have no sales or customers who are paying you......

You will need some other temporary sources of cash, like through a temporary line of credit, to get you going and on to a positive cash flow situation......

Cash flow is the money that is moving (flowing) in and out of your business in a month. Although it does seem sometimes that cash flow only goes one way - out of the business - it does flow both ways.

Cash is coming in from customers or clients who are buying your products or services. If customers don't pay at the time of purchase, some of your cash flow is coming from collections of accounts receivable.

For some businesses, like restaurants and some retailers, cash is really cash - currency and paper money. The business takes cash from customers and sometimes pays its bills in cash. Cash businesses have a special issue with keeping track of cash flow, especially since they may not track income unless there are invoices or other paperwork. Cash businesses are more at risk of being ​audited by the IRS.

Dealing with cash flow issues is most difficult when you are starting a business. You have many expenses and money is going out fast. And you may have no sales or customers who are paying you. You will need some other temporary sources of cash, like through a temporary line of credit, to get you going and on to a positive cash flow situation.

Cash flow is particularly important for seasonal businesses - those that have a large fluctuation of business at different times of the year, like holiday businesses and summer businesses. Managing cash flow in this type of business is tricky, but it can be done, with diligence.

which reports operating cash flow, investing cash flow and financing cash flow — is essential for assessing a company’s liquidity, flexibility and overall financial performance.

cash flow statement only counts liquid assets, it makes adjustments to operating income in order to arrive at the operating income that flows in as cash and cash equivalents.

Investments that appear as assets on the balance sheet are deducted, because these were presumably paid for in cash. The statement also takes debt repayments, dividends and foreign exchange impacts into account.

The operating cash flow ratio is a measure of how well current liabilities are covered by the cash flows generated from a company's operations.

Cash flow from investing activities reports the total change in a company's cash position from investment gains/losses and fixed asset investments.

Compared with the income statement or the balance sheet, the cash flow statement gets perhaps the least amount of attention from everyday investors. Ironically, the cash flow statement can be the most telling of the three financial statements; in fact, it's the only financial statement that matters to many investors. Here are ten things you need to remember about this important report.

The cash flow statement is broken into three sections covering the fundamental components of every business: cash from operations, cash from investing activities, and cash from financing activities. In general, the cash from operations section deals with the cash inflows and outflows directly related to the company's primary activity: selling a good or service.

The cash from investing activities section shows how much the company spent (or made) on buying (or selling) assets such as property, equipment, or even other companies. The cash from financing activities shows the inflows and outflows of capital the company uses to fund its operations; this is where one sees the proceeds from equity offerings, for example, or payments on bonds or bank debt.

Not only does it answer this question, it shows the reader what aspects of the business are generating the cash and what aspects are burning the cash. In many analytical situations, there is nothing as important as knowing its sources and uses of cash.

Income statements and balance sheets include non-cash expenses, depreciation often being the largest of those. But guess what? Nobody's actually writing a check to "Depreciation." It's a non-cash expense, so the cash flow statement gets rid of it. This is a big reason companies might never show a dime of net income but could be spinning off millions in cash.

This is somewhat of a rehash of point #3, but it's important. One of the beautiful things about the cash flow statement is that, for the most part, it simply tracks the movement of cash. It is not as influenced by accrual accounting methods, which record expenses in the period in which they're incurred.

For example, if the accounting department cuts a check to Allstate for, say, the next six months of insurance premiums, this month's income statement will only reflect one-sixth of the check amount each month for the next six months. This month's cash flow statement, however, will show the full amount of the check as a cash outflow, because that's what actually happened to the cash. The cash flow statement doesn't care that the bill was for the next six months of insurance. It only cares that cash left the account.

The cash flow statement discloses the total amount of cash used to purchase assets or make other capital expenditures.

The cash flow statement doesn't care whether this month's cash outflows are for transactions actually associated with next month or next year.