Cash Flow

Christopher Williams
Business Studies
Monday, 11 November, 2002

Q. Explain the meaning of cash flow and why it is often referred to as the lifeblood of the business.

Finance is the art and science of managing money. Cash flow is a major characteristic of finance and can be described as the coming in and going out of cash over a specific period. Cash is needed to assist in covering day to day expenses of a business. Various forms of cash exist including notes, coins and cheques which may be in the form of petty cash or money held in a bank account.
Negative cash flow occurs when a firm depletes all the funds in their account and need to use an overdraft facility. Positive cahsflow would describe a situation where the firm has money in the bank available to meet current expenses. Not only does cash need no be managed efficiently but poor cash flow management leads to the 'winding up' (ceasing of operations) of a business.

Cash coming into the business is called cash inflow a...