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Cash flow refers to the net amount of cash and cash-equivalents being transferred into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing, enabling it to settle debts, reinvest in its business, return money to shareholders, pay expenses, and provide a buffer against future financial challenges.

Cash flow is crucial for all businesses, but particularly for startups, as it can be a key indicator of financial health and operational viability. Cash flow can be calculated using a cash flow statement, which breaks down cash inflows and outflows into operating, investing, and financing activities. A business may be profitable but still fail if it does not manage its cash flow wisely.