Cash Flow Analysis
Cash flow analysis examines the timing and amounts of money flowing in and out of a household or business to ensure adequate liquidity, identify patterns, and plan for financial goals.
Exam Tip
Cash flow = inflows minus outflows. Net positive = surplus for savings/investing. Emergency fund = 3-6 months expenses.
What is Cash Flow Analysis?
Cash flow analysis tracks all income sources and expenses to understand financial patterns and ensure sufficient liquidity.
Components
| Category | Examples |
|---|---|
| Inflows | Salary, bonuses, investment income, rental income |
| Outflows | Fixed (mortgage, insurance), Variable (food, entertainment) |
Cash Flow Statement
| Item | Amount |
|---|---|
| Total Income | + |
| - Fixed Expenses | - |
| - Variable Expenses | - |
| = Net Cash Flow | = |
Emergency Fund
3-6 months of expenses recommended. More if unstable income.
Study This Term In
Related Terms
Emergency Fund
An Emergency Fund is a readily accessible savings reserve equal to 3-6 months of essential living expenses, designed to cover unexpected costs or income loss without requiring debt or liquidating investments.
Net Worth Statement
A Net Worth Statement (Personal Balance Sheet) is a financial snapshot showing total assets minus total liabilities at a specific point in time, providing the foundation for financial planning by measuring wealth and tracking progress toward goals.