Cash Balance
BeginnerA cash balance is the amount of cash held at a specific moment, such as the money in a bank account at the end of a day or a month.
A cash balance is a snapshot. It tells you how much cash is available right now, not how much has come in or gone out over a period. The movements over time are called cash flows.
The link between the two is simple. The closing balance equals the opening balance, plus money received, minus money paid out. If you start the month with 2,000, receive a salary of 3,500 and pay out 3,100 in bills and spending, you finish the month with a cash balance of 2,400.
For a business, the cash balance appears on the balance sheet, usually as "cash and cash equivalents". Managers watch it closely, because a healthy cash balance means the company can pay its bills on time even if customers pay late or sales dip.
A large cash balance is not always a good thing. Cash sitting idle earns little, so a company holding far more than it needs may be missing better uses for the money, such as investing in growth or returning it to shareholders.
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