What does the term "cash flow" refer to in a business context?

In a business context, "cash flow" refers to the total amount of money being transferred into and out of a business. This concept is vital because it reflects how well a company can manage its money to sustain operations, invest in growth, and meet its financial obligations. Positive cash flow indicates that more money is coming into the business than going out, which is crucial for maintaining liquidity and financial health.

Understanding cash flow helps businesses to make informed financial decisions, ensuring that they have enough cash on hand to cover expenses, invest in opportunities, and handle unexpected costs. It's essential to distinguish this from other financial measures, such as profits, which do not account for cash movements. Cash flow focuses explicitly on cash transactions, providing an immediate view of financial performance over a specific period.