1. What is Cash Flow?

Cash flow represents the net amount of cash moving in and out of a business. It's calculated by summing the operating cash flow, investing cash flow, and financing cash flow. Positive cash flow indicates a company's liquid assets are increasing, enabling it to settle debts, reinvest, and grow.

2. How Does the Calculator Work?

The calculator uses the cash flow formula:

Where:

• Operating Cash Flow — Cash generated from core business operations
• Investing Cash Flow — Cash used for investments in capital assets
• Financing Cash Flow — Cash from investors or paid to shareholders

3. Importance of Cash Flow Calculation

Details: Cash flow analysis helps businesses understand their financial health, manage liquidity, make investment decisions, and demonstrate viability to investors and creditors.

4. Using the Calculator

Tips: Enter dollar amounts for each cash flow component. Positive values represent cash inflows, negative values represent outflows.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between profit and cash flow?
A: Profit is revenue minus expenses (accrual accounting), while cash flow tracks actual cash movement regardless of when revenue/expenses are recognized.

Q2: Can a profitable business have cash flow problems?
A: Yes, if revenue is tied up in accounts receivable or inventory, or if there are large capital expenditures.

Q3: What is free cash flow?
A: Operating cash flow minus capital expenditures - represents cash available for dividends, debt repayment, etc.

Q4: How often should cash flow be calculated?
A: Businesses should monitor cash flow monthly at minimum, with more frequent monitoring during growth periods.

Q5: What's a good cash flow ratio?
A: A ratio of operating cash flow to current liabilities >1:1 is generally healthy, indicating ability to cover short-term obligations.