University of Maryland Extension

What is cash flow?

Dale M. Johnson, Extension Specialist, Farm Management

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Another important economic measurement is cash flow. Cash flow is closely related to profitability but there are significant differences. While profit is concerned with the income versus expenses for a production period such as a calendar year, cash flow is concerned about the ending cash balance on hand at given points of time during the production period, the “checkbook balance” so to speak. Cash flow also considers cash inflows and outflows not include in calculating profit. Assessing cash flow can help you plan to have cash on hand at any time when you need it to both pay for seasonal expenses and to weather unexpected expenses and emergencies.

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