25 Cash Flow Management Terms in Business
Welcome to our guide on the top 25 cash flow management terms you need to know as a business owner. Managing your cash flow is crucial for the survival and growth of your company, and understanding these key terms will help you make better financial decisions.
- Cash flow: The movement of cash into and out of a business over a specific period of time.
- Cash flow statement: A financial statement that shows the inflow and outflow of cash in a business for a given period of time.
- Operating activities: The day-to-day activities in a business that generate cash, such as sales, inventory purchases, and expenses.
- Investing activities: The purchasing and selling of long-term assets, such as equipment or property, that affect a business’s cash flow.
- Financing activities: The obtaining and repaying of capital through sources such as loans, stock issuances, or dividends.
- Accounts receivable: Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.
- Accounts payable: Money owed by a business to its suppliers for goods or services that have been received but not yet paid for.
- Cash flow forecast: A projection of future cash flow based on expected inflows and outflows, used for planning and budgeting purposes.
- Operating cash flow: The amount of cash generated by a business’s core operations, excluding any investing or financing activities.
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- Free cash flow: The amount of cash available for a business to invest in growth opportunities after accounting for capital expenditures and debt payments.
- Net cash flow: The difference between the total inflows and outflows of cash in a given period.
- Cash flow cycle: The time it takes for a business to convert its inventory into cash received from customers.
- Positive cash flow: When a business has more cash coming in than going out, resulting in a surplus of funds.
- Negative cash flow: When a business has more cash going out than coming in, resulting in a deficit of funds.
- Cash inflows: Any source of cash coming into a business, such as sales revenue, loan proceeds, or investment income.
- Cash outflows: Any use of cash by a business, such as paying for expenses, purchasing assets, or repaying debt.
- Liquidity: The ability of a business to quickly convert its assets into cash without incurring significant losses.
- Working capital: The amount of money a business has available for its day-to-day operations, calculated by subtracting current liabilities from current assets.
- Cash conversion cycle: The time it takes for a business to convert its inventory into cash received from customers and then pay its suppliers.
- Burn rate: The rate at which a business uses up its cash reserves, typically expressed as the amount of time until the business runs out of funds.
- Cash flow from operations (CFO): The amount of cash generated from a business’s operating activities, including changes in working capital.
- Cash flow to debt ratio: A measure of a business’s ability to generate enough cash to cover its debt obligations within a given period.
- Payables turnover ratio: A measure of how quickly a business pays its suppliers, calculated by dividing purchases by average accounts payable.
- Receivables turnover ratio: A measure of how quickly a business collects payments from its customers, calculated by dividing sales revenue by average accounts receivable.
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- Cash flow hedge: A financial instrument used to mitigate the risk of changes in cash flow due to fluctuations in interest rates, exchange rates, or commodity prices.
Congratulations, you have completed learning about 25 cash flow management terms in business! By now, you should have a better understanding of these important concepts and how they relate to your company’s financial health.
