Revenue does not come in at the same time as costs have to go out. This is the main problem facing by most of business companies and the whole point about cash flow. Proper management of cash flow is important in the smooth running, survival and success of a business.

The statement of cash flow is one of the four main financial statements of a company. Cash flow is the balance of the amounts of cash coming into a business and paid by a business during a defined period of time.

The statement of cash flow breaks the sources of cash generation into three sections: operational cash flow, investment cash flow, and financing cash flow.

Operational Cash Flow (OCF) or working capital is the cash received or expended as a result of the company’s core business activities. It comes from sales of the product or service of your business, and because it is generated internally, it is under your control.

Investment Cash Flow is cash received or expended through capital expenditure, investments or acquisitions. This includes investments in plant and equipment or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash outside of normal operations.


Financing Cash Flow is cash received or expended as a result of financial activities, such as interests, dividends and stock repurchases. It is the cash to and from external sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan, the issuance of stock, and the payment of dividend are some of the activities that would be included in this section of the cash flow statement.

Payments do not always arrive when they should, which can be the start of the cause of cash flow problems. A lot of businesses fail for lack of cash flow – regardless of how good the business is. Cash flow is important to a business’s survival. Having ample cash on hand will ensure that creditors, employees, telephone bills and others can be paid on time. Companies will be able to invest the cash back into the business in order to generate more cash and profit.