Formula
Cash Flow = Cash Inflows – Cash Outflows
Calculation Example
If a company receives $500,000 from sales and spends $300,000 on expenses, Cash Flow = $500,000 – $300,000 = $200,000
Data Source
Financial statements, accounting records
Tracking Frequency
Monthly, Quarterly, Annually
Optimal Value
Positive cash flow ensures financial stability and growth.
Minimum Acceptable Value
Should not be consistently negative, as it indicates financial trouble.
Benchmark
Varies by industry; generally, higher is better.
Recommended Chart Type
Line chart (for trend analysis), Bar chart (to compare periods)
How It Appears in Reports
Displayed as a net figure in financial reports.
Why Is This KPI Important?
Indicates whether a business has enough liquidity to cover expenses and invest in growth.
Typical Problems and Limitations
Does not reflect profitability directly; a business can have positive cash flow but still operate at a loss.
Actions for Poor Results
Reduce unnecessary expenses, improve invoicing efficiency, increase revenue streams.
Related KPIs
Net Profit, Working Capital, Quick Ratio
Real-Life Examples
A startup improved cash flow by reducing inventory costs and negotiating better payment terms.
Most Common Mistakes
Confusing cash flow with profit, not considering seasonal cash flow fluctuations.
