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
In the simplest terms, It means the direction money is flowing in your business. There are specific definitions for revenue, gross profit, net profit…etc. but positive cash flow just means more money flowing into your company than is going out, and negative cash flow means money money is going out than coming in.
So, for instance, this year, I made one product that cost $100 dollars to produce, and I sold it for $50. My gross profit is $-50. But I also spent $25 advertising the product, so my net profit is $-75.
However, I also received a grant from the government this year for $100. My positive cash flow this year was $25. Although I am not profitable selling my products, I was able to maintain positive cashflow because of other sources.
The opposite could be true, where I made a net profit of $50, but had to repay a $100 loan, so my cashflow was $-50 this year.
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