What Affects Cash Flow?

The amount of cash in the business is driven by three things:

• Operations – income from selling products and services, minus the expense of delivering those products and services
• Investments – money spent on big assets like real estate or equipment, offset by money received when reselling similar big ticket items
• Finance – money received as loans, offset by money repaid to banks. Shareholder investments are also captured here, and these are offset by dividend payments.

Ideally, cash flow most commonly comes from operations. It won’t be sustainable if all your cash comes from loans, investments, or selling assets.