Who can easily understand what cash flow is and why it is important?

The origin of cash flow is modern financial management, which refers to the total amount of funds received and paid by cash outflow and cash inflow during the whole life cycle of investment projects.

Cash flow is necessary information to evaluate the economic benefits of investment schemes, so it is very important.

Cash flow management is an important function of modern enterprise financial activities, and establishing a perfect cash flow management system is an important guarantee to ensure the survival and development of enterprises and improve market competitiveness.

Cash flow is an important concept in modern financial management, which refers to the cash inflow, cash outflow and its total amount generated by certain economic activities (including business activities, investment activities, fund-raising activities and non-recurring projects) in a certain accounting period, that is, the inflow and outflow of cash and cash equivalents in a certain period.

For example: selling goods, providing services, selling fixed assets, recovering investment, borrowing funds, etc. , forming the cash inflow of enterprises; Purchase of goods, acceptance of labor services, purchase and construction of fixed assets, cash investment, repayment of debts, etc. , forming the cash outflow of the enterprise. Cash flow is a very important indicator to measure whether an enterprise is in good operating condition, whether it has enough cash to repay debts and liquidity of assets.

Factors that affect or not affect cash flow mainly include:

(1) Changes in cash items will not affect changes in net cash flow. For example, withdrawing cash from the bank, depositing cash in the bank, and buying bonds due in two months with cash all belong to internal capital conversion between cash items, which will not increase or decrease cash flow.

(2) The increase or decrease of non-cash items will not affect the change of net cash flow. For example, paying debts with fixed assets, investing abroad with raw materials, paying debts with inventories, and investing abroad with fixed assets. They all belong to the increase or decrease of non-cash items, do not involve cash receipt and payment, and will not increase or decrease cash flow.

(3) The increase or decrease between cash items and non-cash items will affect the change of net cash flow. Such as paying for purchased raw materials in cash, investing abroad in cash, and recovering long-term bonds, all involve the increase or decrease of cash items and non-cash items, which will cause cash inflow or cash expenditure.