Cash flow tracks actual cash received and paid. A company can report accounting profit yet run short of cash if customers pay late or if it invests heavily. The cash flow statement usually splits activity into operating, investing, and financing sections so you can see where the money came from and went.
Key takeaways
- Profit is an accounting idea; cash flow is what pays salaries, suppliers, and debts.
- Strong operating cash flow is often healthier than one-off financing inflows.
- Negative cash flow is not always bad if it funds growth that later pays off.
- Compare cash flow with reported earnings to spot quality of profits.