what is cash flow

What is the cash flow?

What is the cash flow

Millions of people don’t know what is cash flow? And they never try to understand it thousands of companies always try to make their cash flow positive and they hire so many people to maintain their cash flow because if you don’t know about your cash flow then it will always bad for your financial profile doesn’t matter you have a business or you are a common family man.  

when money comes to you and when it going out from you that process we can call cash flow, you can guess about income and all expenses of any person by looking at his cash flow and how many sources of income he has and how he is expending it, you can say this is the financial condition profile which every person need to know how he is doing.

When you write down 2 things on a paper first thing is all sources of your income and the second thing is all your expenses that call a budget and at the end when income is high then your cash flow is positive or if your expenses are high then your income in that condition your cash flow is negative that means your financial condition is not good, you need to do fewer expenses or make more income sources.

in any particular time periods like 6 months or 1 year, you have checked your cash flow, in any business or family your total incoming cash flow and your total outgoing cash flow expenses that means your incoming and outgoing movement is cash flow.

Types of cash flow

Positive cash flow – in positive cash flow your income higher them your expenses and that important for common people to multimillionaire businesses as well.

Negative cash flow – in negative cash flow your expenses higher than your income.

Break-even cash flow – in the break even cash flow your expenses and your income both are equal.

Importance of cash

Every person try to make his income higher than his expenses and those people who get success to make his income higher than his expenses they always feel good and they take less stress they feel positive as well.

you know that Positive cash flow means any business is generating more income than their expenses and that business make more profits for the others because they know they have positive cash flow and they can take risks that can help them in the future.

If you want to invest in and the company then you should know first that companies’ cash flow is positive or negative this method make you safe if you invest that kind of company which is not even making his company cash flow positive then how you can earn money from that company.

Cash flow statement 

Cash flow statement is made with the financial statement in this statement bank and cash opening cash which is add in current incoming finance and all expenses in that year and less from that statement.

Definition

Opening balance of cash in hand and cash at bank +(add) cash generated from operational activates +(add) cash from other sources.

With this total, we need to less

-(less) all the operational expenses done during the financial year (less) all other expenses done during the financial year.

After all this process you will understand how your money is coming in and outgoing and where you are expending it always make write down your expense it helps you to know-how you are earning and how much you are losing.