Cash flow is the net amount of cash and cash equivalents moving into and out of a business over a period of time. Positive cash flow indicates that a company's liquid assets are increasing, while negative cash flow means they are decreasing. Cash flow comes from cash receipts from customers and cash uses like payments for expenses. Maintaining adequate cash flow is important for businesses to avoid failure. Cash flow statement categorizes cash sources and uses into operating, investing, and financing activities. Operating activities involve production and sales. Investing activities involve capital expenditures and investment purchases/sales. Financing activities involve obtaining funds through debt and equity issuance or repayments.

1. Financial
Accounting
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3. What is Cash Flow?
 Cash flow is the net amount of cash and cash-
equivalents moving into and out of a business.
 Positive cash flow indicate that a company's liquid assets
are increasing.
 Negative cash flow indicate that a company's liquid
assets are decreasing.
 Cash flow provide information
 Cash receipts(cash inflow)
 Cash use(cash outflow)
 During the period of time
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4. Cash is coming in from customers or clients who are
buying your products or services. If customers do not pay at
time of purchase, some of your flow is coming from
collections of accounts receivable.
Cash is going out of your business in the form of payment
for expenses, like rent or a mortgage, in monthly loan
payments, and in payments for taxes and other accounts
payable.
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5. Importance of cash flow
Lack of cash in one of the biggest reasons small
businesses fail. The Small Business Administration
says that “inadequate cash reserves” are a top reason
startups don't succeed. It’s called “running out of
money”, and it will shut you down faster than
anything else.
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6. Operating activities
 Operating activities include the production, sales
and delivery of the company’s product as well as
collecting payment from its customer. This could
include purchasing raw materials, building
inventory, advertising and shipping the product.
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7. Classification of inflow & Outflow of
Cash Operating Activities
Cash inflow
1) Cash sales
2) Received from
debtor
3) Commission &
fees
Cash Outflow
1) Cash purchases
2) Payment to
creditors
3) Payment of wages
4) income tax
5) Postage paid
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8. Investing activities:
 Cash flow from investing activities is an item on the cash
flow statement that reports the aggregate change in a
company's cash position resulting from any gains (or losses)
frominvestments in the financial markets and operating
subsidiaries and changes resulting from amounts spent
on investments in capital assets ...
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9. Items that are including investing activities
 Purchase of fixed assets
( negative cash flow )
 Sale of fixed assets
(positive cash flow)
 Purchase of investment instruments
(nagetive cash flow)
 Sale of investment instruments
( positive cash flow )
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10. Items that are Including investing activities
 Lending of money
(negative cash flow)
 Collection of loans
(positive cash flow)
 Proceeds of insurance settlements related to
damaged fixed assets
(positive cash flow)
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12. Classification of Inflow &
Outflow of Cash
Investing Activities
Cash Inflow
1) Sale of fixed
assets
2) Sale of
investments
3) Sale of
machinery
4) Sale of furniture
Cash Outflow
1) Purchase of
fixed assets
2) Purchase of
furniture
3) Purchase of
plant
4) Purchase of
building
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13. Financing activities
 Are business activities that involve issuing and paying
off debt, issuing preferred and common stock, paying
cash dividends, and acquiring treasury stock.
 In other words, in general financing activities
involve obtaining funds to start and operate a
business. Such activities reflect the relationship
between the company and its lenders (e.g. bank)
and owners (e.g., shareholders). For instance,
issuing bonds and repaying the debt is a financing
activity that involves creditors while paying cash
dividends is a financing activity that involves
owners.
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14. Classification of Inflow & Outflow of
Cash
Financing Activities
Cash Inflow
1) Issue of shares
in cash
2) Issue of
debentures in
cash
3) Proceeds from
long-term
borrowing
Cash Outflow
1) Payment of
Loans
2) Payments of
dividends
3) Interest paid
4) Payment of
other long-term
liabilities
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