What is cash flow?

• A. The reported net income after taxes for a period.
• B. The supply of money continuously received from operations and other sources and the supply continuously dispersed to pay expenses, including the payment of debt.
• C. The amount of cash spent on investments.
• D. The total amount of cash on hand at year-end.

Answer: (B)

Cash flow is the net amount of cash moving into and out of a business over a period, showing the actual cash generated and used. It reflects liquidity and timing of cash, not accounting profit. This description fits cash flow because it covers money received from operations and other sources and money spent to pay expenses, including debt payments. Net income, by contrast, is an accrual-based measure and not the same as cash flow; investing cash outlays or the ending cash balance are only parts of cash flow or a single snapshot, not the ongoing flow itself.