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What is positive cash flow?

Definition: Positive cash flow refers to a situation in which a business or other organization generates more cash than it spends over a given period of time. In other words, positive cash flow occurs when the cash inflows (such as revenue from sales or investment income) exceed the cash outflows (such as expenses and debt payments).

Positive cash flow is an important indicator of financial health, showing that an organization has sufficient cash available to meet its financial obligations and fund its operations. 

It can also be a sign of future growth and stability, as it suggests that the organization is generating sufficient cash to invest in new opportunities or to build up reserves for leaner times.

Positive cash flow example

A small retail store generates $50,000 in revenue from the sale of its products in a month. The store's monthly expenses, including rent, utilities, payroll, and other expenses, total $30,000. 

This means that the store has a net cash flow of $50,000 - $30,000 = $20,000 for the month. 

In this case, the store has a positive cash flow of $20,000, meaning it has more cash coming in than going out.

This positive cash flow can help the store to meet its financial obligations, such as paying its bills and employees and to invest in growth opportunities, such as expanding its product line or marketing efforts. 

It can also help the store to build up its cash reserves, which can provide a financial cushion in case of unexpected expenses or downturns in business.

Does cash flow positive mean profitable?

Most of the time, but this isn't always the case. A company can have positive cash flow without making a profit. An organization may record a net loss but receive enough money from cash inflows to offset the loss and have a positive cash flow.

What are the three types of cash flow?

  1. Cash flow from operations (CFO), or operating cash flow
  2. Cash flow from investing (CFI), or investing cash flow
  3. Cash flows from financing (CFF), or financing cash flow

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Article FAQs

What is the difference between positive cash flow and negative cash flow?
Positive cash flow indicates that a company brings in more money than it is spending and has enough cash to continue operating. Negative cash flow is the opposite of this — when there is more cash outflow than inflow into the company.

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