What is cashflow?

Question

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

Answer 1

Say you have a business that costs $12/year to run. At the end of the year you get a single $100 cash payment . So your profit is $88/year but each month you have to pay you employee $1 in cash.

So your business is very profitable but you have a cash flow problem. You will have lots of cash later but you need it now to pay your employee.