Cash flow
Also called: operating cash flow, cash flow from operations
The actual money coming into and going out of a business in a period, which can differ greatly from its reported profit.
Cash flow records money when it actually moves. Profit, by contrast, records sales when they are made and costs when they are incurred. Selling on credit, building up stock and buying equipment can all leave a business with much less cash than its profit suggests.
Comparing cash flow from operations with net profit over several years is a useful check on the quality of a company's profits.
Learn more in these lessons
- Profit compared with cash flowWhy can a profitable company run out of cash?
- The cash flow statementHow do you read a cash flow statement?
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