Monitoring and managing this lifeline should be of utmost concern to business owners around the world. To properly manage cash flows, a couple of basic definitions are required. Every business has monies flowing in and monies flowing out.
Cash flow boils down to the net of the inflows and outflows during a particular time period.
If monies flowing in are greater than monies flowing out, positive cash flow results. When monies flowing out are greater than monies flowing in, insolvency results. The statement of cash flow is an excellent tool to monitor cash flows systematically for any time period during a business year. The statement of cash flow is a technical statement, but it can be learned by any business owner. Essentially, the statement is a listing of increases and decreases in cash in regards to operating, financing, and investing activities.