What does "cash flow" refer to?

"Cash flow" refers to the total inflow and outflow of cash during a specific period. This concept is crucial in personal finance and business because it provides a comprehensive view of an individual's or a company's financial health. By tracking cash flow, one can better understand income sources (such as salaries, rental income, or investment dividends) and expenses (like bills, groceries, and loan payments).

Positive cash flow indicates that more cash is coming in than going out, which is a sign of good financial management and stability. Conversely, negative cash flow can signal potential financial struggles, as it suggests that expenditures exceed income during that period. This understanding can help individuals make informed decisions about saving, investing, and budgeting to enhance their financial position.