How_Money_Works_-_The_Facts_Visually_Explained

Cash flow

The money coming into and going out of a business is called cash flow.

Inflows arise from financing, operations, and investment, while outflows

include expenses, costs of raw materials, and capital costs.

Sales revenue

Cash for goods and services sold

❯❯Revenue generated by core operations

❯❯Profit that does not have to be repaid, unlike loans

or capital

❯❯Payment received for goods and services provided

❯❯Also known as cash flow from operating activities

Capital

Investment and lump sums

❯❯Main source of cash inflow for start-ups

❯❯Additional cash injection after the initial start-up

❯❯Revenue from flotation (going public)

of private companies, and from shares issued by

public companies

❯❯Also known as cash flow from investing activities

Overheads

Payment of bills

❯❯Rental cost of commercial

property; utility bills (water,

electricity, gas, telephone, and

internet); office supplies and

stationery

❯❯Salaries and wages of employees

not directly involved in creating

goods and services (known as

indirect labor)

Loan repayments

Debt servicing and

shareholder profit

❯❯Interest on long-term loans for

asset purchases and on short-

term loans for working capital

❯❯Repayments on loans

❯❯Commission paid to factoring

(payment-collecting) companies

❯❯Share repurchases and dividend

payments to shareholders

Cash in hand

Salaries and wages

Payments to employees

❯❯Money paid to employees who

are directly involved in the

creation of goods or the provision

of services

❯❯Salaries paid to staff as a fixed

monthly or weekly amount

(based on an annual rate)

❯❯Wages paid to contractors for

hours, days, or weeks worked

CASH OUT CASH OUT CASH OUT

CASH IN CASH IN

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