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*)
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Cash flow is how money comes into a company over time. A big thing that finance departments have to deal with is that many costs are very regular, such as rent being due every month, but revenue comes in at a much more irregular pace. This means that you might have a bill due, but you don’t have the money *right now* to pay for it. Think about net payments, for example. Most suppliers allow for payment within 30 to 60 days. So let’s imagine that the auto glass company has net 60 payments, and they sell $10 million of auto glass to GM. If GM had to pay on delivery, the glass company would turn around and use the money to make more auto glass, which they could then sell. Since GM is paying on net 60 terms, the glass company is now stuck for 2 months having no inventory, and no money to replenish their inventory. There are ways around this, like PO financing and having long-term contracts, but the fact that money comes in inconsistently must still be dealt with.
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