Cash flow measures how much money you have coming in and how much money is going out. The difference is your net cash flow. It is important to know your net cash flow because it is a good indication of your current financial situation. Positive net cash flow means you have more money coming in than you are spending. This indicates that you are living within your means and in good financial health. In this situation, you would be able to increase your savings, pay down debt or make purchases. Negative net cash flow means you are spending more money than you have coming in. In order to fix a negative cash flow, you need to reduce your spending or increase your income. Continual negative cash flow without savings can indicate that someone is increasing debt load and could be in a bad financial situation.
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