Cash flow is a financial metric that tracks the flow of funds within an organization, encompassing all cash inflows and cash outflows over a specific time frame. It provides a detailed view of the financial health and operational efficiency of the business. Maintaining a positive cash flow, where inflows exceed outflows, is essential for sustaining business operations and fostering future growth.

For example, cash inflows may arise from sales revenue, accounts receivables, or financing activities like loans or investor funding. Conversely, cash outflows could include operating expenses such as salaries and utility bills, capital expenditures like purchasing machinery, and financial repayments such as paying off loans or distributing dividends.

Cash flow can be categorized into three main types: operating cash flow (relating to primary business operations), investing cash flow (related to investments in assets), and financing cash flow (linked to debt and equity transactions). Businesses meticulously analyze cash flow statements to make informed budgeting, investment, and operational decisions.