.svg){kind=logo}
Cash flow is the net amount of cash moving into and out of a business, critical for retailers to manage operations, pay expenses, and invest in growth, with calculations involving cash from operating, investing, and financing activities.
Cash flow refers to the net amount of cash and cash-equivalents being transferred into and out of a business. For retailers, cash flow is the movement of money from sales to suppliers, employees, and other expenses, as well as from financing and investment activities.
To calculate cash flow, you would typically use a cash flow statement and look at three main components:
- Cash from Operating Activities: This includes all cash received from sales minus operating expenses.
- Cash from Investing Activities: This involves cash used for purchasing capital assets or investments, minus any cash received from the sale of assets or investments.
- Cash from Financing Activities: This includes cash received from debt or equity financing, minus cash paid out as dividends or debt repayments.
Cash flow is important for retailers because it indicates the company's ability to generate enough cash to maintain and grow operations, which is essential for paying suppliers, employees, and for investing in inventory and infrastructure. Positive cash flow means a company can meet its financial obligations, while negative cash flow can signal potential problems that might require attention.