What is cash flow in finance?

Cash Flow (CF) is the increase or decrease in the amount of money a business, institution, or individual has. In finance, the term is used to describe the amount of cash (currency) that is generated or consumed in a given time period. There are many types of CF, with various important uses for running a business and performing financial analysis.

What is the difference between cash on hand and cash flow?

Cash on hand determines a company’s runway—the more cash on hand and the lower the cash burn rate, the more room a business has to maneuver and, normally, the higher its valuation. Cash flow differs from profit. Cash flow refers to the money that flows in and out of your business.

How to perform a cash flow analysis?

To perform a cash flow analysis, you must first prepare operating, investing and financing cash flow statements. Generally, the finance team uses the company’s accounting software to generate these statements. Alternately, there are a number of free templates available. Let’s first look at preparing the operating cash flow statement.