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.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Cash Flow" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Cash Runway Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Runway and burn: gross vs net burn, working capital, and cash levers) for context and common pitfalls.
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.