Cash flow is the movement of an organization’s cash inflows (cash received from the sale of goods and/or services) and cash outflows (used to pay for the costs of running the business).

Cash flow forecasting and cash flow statements are often used to measure the financial health of a business. This is because the comparison of cash inflows and cash outflows enables managers to see whether the business is able to pay its costs in order to maintain its operations.

The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:

• The difference between profit and cash flow (AO2)
• The working capital cycle (AO2)
• Cash flow forecasts (AO2, AO4)
• The relationship between investment, profit and cash flow (AO2)
• The following strategies for dealing with cash flow problems (AO3):
  • reducing cash outflow
  • improving cash inflows
  • looking for additional finance