Definition
Cash flow is the net movement of cash in and out of the business. It differs from profit due to working capital and timing.
Example
A common reason profit and cash diverge is accounts receivable: you can record revenue today but collect cash later.
How to use it
- Operating cash flow is affected by working capital (AR/AP/deferred revenue).
- Investing cash flow includes capex and acquisitions.
- Financing cash flow includes debt, equity, and repayments.
Measured as
Measure Cash Flow with the same date, unit basis, and accounting or policy definitions used in the rest of your model.
Operator takeaway
- Operating cash flow is affected by working capital (AR/AP/deferred revenue).
- Investing cash flow includes capex and acquisitions.
- Financing cash flow includes debt, equity, and repayments.
- Tie Cash Flow to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Quantify the impact with Cash Runway Calculator if you need to turn the definition into an operating assumption.
- Read Runway and burn: gross vs net burn, working capital, and cash levers if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- Cash Runway Calculator: Estimate runway from cash balance, revenue, gross margin, and operating expenses (optionally with revenue growth).
- DCF Valuation Calculator: Estimate enterprise value using a simple DCF: forecast cash flows, apply a discount rate (often WACC), and add a terminal value.
Guides
- Runway and burn: gross vs net burn, working capital, and cash levers: A practical guide to runway: compute net burn, understand why cash differs from profit, and how working capital and collections change runway.
- Cash conversion cycle: turn working capital into runway: A practical guide to the cash conversion cycle (CCC): how AR/AP timing changes cash, how to reduce days outstanding, and why runway depends on working capital.
- Cash runway: how to estimate burn, break-even, and survival time: A practical guide to runway: net burn, gross profit, break-even revenue, and how to avoid common cash planning mistakes.
- DCF valuation: forecast cash flows, discount rate, and terminal value: A practical guide to DCF valuation and WACC discount rate choices: how to forecast FCF, choose a discount rate, and avoid terminal value traps.
- Discount rate: how to choose it for NPV and DCF: A practical guide to discount rates: what they mean, how to choose a rate (WACC vs MARR), and how to avoid common mistakes.