Cash flow is the movement of money in and out of a business. It is the lifeblood of any business, large or small. Without cash flow, a business cannot pay its bills, make payroll or buy inventory. In short, cash flow is essential to the survival of any business.
There are two types of cash flow: operating and investing. Operating cash flow is the money that comes into a business from its normal operations, such as sales of products or services. Investing cash flow is money that moves in and out of a business as a result of its investments, such as buying new equipment or selling shares of stock.
Cash flow can be positive or negative. Positive cash flow means that more money is coming into the business than going out; negative cash flow means the opposite. A company with positive cash flow is said to be cash positive, while one with negative cash flow is cash negative.
Most businesses strive for positive operating cashflow because it allows them to grow and expand their operations. However, even companies with negative operating cashflow can survive if they have positive investing cashflow (for example, if they are able to sell assets for more than they paid for them). Ultimately, what matters most is not whether a company's overall cashflow is positive or negative, but whether it has enough cash on hand to meet its obligations when they come due.