What Is Cash Flow?
Cash flow is the money coming in minus the money going out over a period, like a month.
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In this lesson you learn to
- Define cash flow as money in minus money out over a period
- Explain why profit and cash flow can differ
- Name the three groups of cash flows
- Work through the bakery example and the supplier-credit twist
Check yourself: sample questions
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1.What is cash flow?
Cash flow is the money coming in minus the money going out over a period, like a month.
2.True or false: profit and cash flow are the same measure.
False. Profit and the cash a business generates are different measures: profit counts a sale when it is made, cash flow when it is paid.
3.Worked example: a bakery sells 10,000 of bread on invoice, paid next month. Its costs this month are 8,000, paid now. What is the profit on paper?
Profit on paper is 10,000 minus 8,000, which is 2,000.
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Sources (3)
- IFRS Foundation: IAS 7 Statement of Cash Flows (Standardseite, Zusammenfassung)
- US SEC: Beginners' Guide to Financial Statements
- Eigene Berechnung (synthetisches Monatsbeispiel)
Education only. Not financial advice.