In finance, what is 'cash flow'?

Cash flow refers to the total amount of money being transferred into and out of a business within a specific period. This encompasses all cash inflows, such as revenue from room bookings, food and beverage sales, and any other sources of income, as well as cash outflows, which include operating expenses, salaries, utility payments, and other costs. Understanding cash flow is critical for hotels and businesses alike because it provides a clear picture of financial health, revealing whether an organization is generating enough cash to meet its obligations.

In contrast, focusing solely on income generated from room bookings does not provide a complete financial picture, as it ignores other revenue streams and operational costs. Similarly, considering only total expenses or profits without recognizing cash inflow provides an incomplete understanding of a hotel's liquidity position. Cash flow management is essential for ensuring a business has sufficient liquidity to support operations and to plan for future investments.