Cash flow shows how much money a company generates and how much it spends. It tracks real cash activity, not just profits. A company may report strong earnings, but if it cannot generate cash, it may struggle to operate or pay its bills.
There are three main types of cash flow:
Operating cash flow shows money earned from regular business activities, such as selling products or services.
Investing cash flow includes money spent on assets like equipment or received from selling investments.
Financing cash flow covers activities such as borrowing, repaying loans, or issuing shares.
Companies monitor cash flow to ensure they can cover expenses, invest in growth, and manage debt. Positive cash flow means the business brings in more money than it spends. Negative cash flow means it is spending more than it receives, which may be normal during growth phases but needs careful management.
Cash flow is essential for daily operations, long-term planning, and financial stability. It helps investors understand how healthy and sustainable a company is beyond reported profits.
Strong cash flow usually comes from consistent sales, efficient operations, controlled expenses, and timely payments from customers. Weak cash flow can come from slow sales, rising costs, late customer payments, or heavy investment spending. Companies with unpredictable cash flow often face higher financial risk.
Investors examine cash flow statements to see whether a company can fund operations, pay dividends, invest in growth, or reduce debt. Reliable cash flow often signals a stable business model. Investors may also compare cash flow trends over several years to identify improvements or warning signs.
Free cash flow is the cash left after a company pays its operating expenses and invests in necessary assets. It shows how much money is truly available for dividends, debt repayment, or expansion. Many investors view free cash flow as a key measure of long-term financial strength.
A company generates $2 million in cash from selling products but spends $1.5 million on salaries, rent, and equipment. Its positive cash flow of $500,000 helps it fund new projects and strengthen its financial position.
FinFeedAPI’s SEC API provides cash flow information for publicly listed companies. Developers use this data to build dashboards, analyze financial health, and compare cash flow trends across companies and industries.
