Cash flow

What is cash flow?

In investing, cash flow refers to the movement of money in and out of an investment (it also applies to the movement of money into and out of a business or an individual’s financial accounts). Within the realm of investing, cash flow is characterized by the net amount of cash and cash-equivalents that are transferred to and from an investment. Essentially, cash flow represents the income that an investment generates, including dividends, interest payments, rental income, and other types of revenue—minus any expenses or costs that are associated with maintaining that investment.

Positive cash flow indicates that an investment is generating more income than it is costing. This signifies financial health and sustainability. Negative cash flow, however, suggests that the investment is not covering its costs. This can be a warning sign for investors, although cash flow can fluctuate. Monitoring cash flow is important for assessing the performance and viability of investments.

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