# What is cashflow?

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I read a lot about the definition but I can’t really get the hang of it.
Is it the cash that the company is left with at the end of the period? (Meaning the cash in their bank accounts *hypothetically*)

In: 14

It pretty literally means what it says. Its a measure of the flow of cash into and out of a company. Obviously of its negative for too long then the company will run out of cash to pay its bills.

it’s mostly used to refer to the amount the company is able to actually spend. so “cash” as in spendable money, not company “value” or stock or something else. so an employee might ask for a raise and their boss could say “we’re having cash flow issues right now, it’s probably not in the cards.” ie “we’re not making enough spendable money / have poorly allocated our spendable money, so we have to limit our spending”

> Is it the cash that the company is left with at the end of the period?

No. Two companies could have the exact same cashflow despite having vastly different amounts of cash.

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Imagine Adam has \$1,000,000 cash in the bank. He uses \$100 to buy some goods, which he later sells for \$200. The cashflow of \$100-out and \$200-in results in a positive net cashflow of \$100 over that time period.

Imagine Bob has \$100 cash in the bank. He uses \$100 to buy some goods, which he later sells for \$200. The cashflow of \$100-out and \$200-in results in a positive net cashflow of \$100 over that time period.

In this example, both Adam and Bob have the exact same cashflows despite Adam having ~\$1,000,000 cash and Bob having ~\$100 cash.

It’s the money that a company generates per time period, minus the money they spend per time period. Positive cash flow means that they are generating a profit.

Large cash flow is good (generally), because it means reducing expenses by a small % could have large total revenue, and makes the company more stable so it’s easier to get loans.

It’s a measure how much cash is coming into and out of a business. Unlike a company’s profit statement which only looks at the income generated from selling goods and services and the expenses associated with making and providing those goods and services, cash flow looks at all ways a company can generate and spend its money. This would also include taking out/paying off loans, purchasing new assets or selling them off, all sorts of things that wouldn’t be included in a profitability calculation. A company’s cashflow statement is a better and more complete picture of the health of a company’s operation than just looking at its profitability.

This [video](https://www.youtube.com/watch?v=hefAHWvrFDQ) from the excellent finance YouTube channel The Plain Bagel summarizes it best.