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Cash flow is the lifeblood of any business. Even profitable businesses can fail if they run out of cash. This lesson explains what cash flow is, how to read and construct a cash flow forecast, and the strategies businesses use to manage cash flow.
Cash flow is the movement of money into and out of a business over a period of time.
| Term | Definition |
|---|---|
| Cash inflow | Money coming into the business (e.g. sales revenue, loans, investment) |
| Cash outflow | Money going out of the business (e.g. rent, wages, raw materials, loan repayments) |
| Net cash flow | Cash inflows minus cash outflows for a given period |
| Opening balance | The amount of cash at the start of a period |
| Closing balance | The amount of cash at the end of a period (= opening balance + net cash flow) |
Cash flow and profit are not the same thing:
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