What is indicated by a surplus in cash flow?

What is indicated by a surplus in cash flow?

• A. More expenses than income
• B. When cash inflow is greater than cash outflow
• C. Reduced profits
• D. A need for inventory restocking

Answer: (B)

A surplus in cash flow occurs when the cash inflow exceeds the cash outflow. This situation indicates that a business is generating more cash from its operations, investments, or financing activities than it is spending. Positive cash flow is crucial for the sustainability of a business, as it allows for covering expenses, investing in new opportunities, repaying debts, and providing returns to shareholders. In this case, the presence of a cash surplus reflects financial health and operational efficiency, suggesting that the business is managing its resources effectively and has additional funds available for growth or reserve. This surplus can be critical when structuring plans for expansion, paying dividends, or maneuvering through economic downturns.

A surplus in cash flow occurs when the cash inflow exceeds the cash outflow. This situation indicates that a business is generating more cash from its operations, investments, or financing activities than it is spending. Positive cash flow is crucial for the sustainability of a business, as it allows for covering expenses, investing in new opportunities, repaying debts, and providing returns to shareholders.

In this case, the presence of a cash surplus reflects financial health and operational efficiency, suggesting that the business is managing its resources effectively and has additional funds available for growth or reserve. This surplus can be critical when structuring plans for expansion, paying dividends, or maneuvering through economic downturns.