How is cash flow defined?

Cash flow is defined as the total amount of money being transferred into and out of a business. This definition encompasses all inflows and outflows of cash, reflecting the operational, investing, and financing activities of the business over a specific period. Positive cash flow indicates that more money is being received than spent, which is critical for maintaining liquidity and ensuring that a business can meet its ongoing obligations, such as paying suppliers, employees, and investors.

Understanding cash flow is essential for evaluating the financial health of a business, as it provides insights into how effectively a company is managing its cash resources to support operational needs and future growth. The focus is on actual cash movement, rather than accounting figures that may include non-cash items or estimates.

In contrast, other options represent different financial metrics but do not capture the essence of cash flow. Total revenue refers to income generated before any costs are deducted, while total expenses account for outgoing cash but do not provide the complete picture of financial activity. Total savings accrued pertains to retained earnings or funds set aside but does not reflect the dynamic movement of cash in a business context.