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The difference between cash inflow and cash outflow is known as:

Question

The difference between cash inflow and cash outflow is known as:

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Solution

The difference between cash inflow and cash outflow is known as Cash Flow. This term is used in financial accounting to describe the amount of cash being received and spent by a business during a specific period of time.

Here are the steps to calculate it:

  1. Identify Cash Inflows: Cash inflows are the sources from which a company earns money. These could be from operations such as sales of goods or services, loans, lines of credit, or asset sales.

  2. Identify Cash Outflows: Cash outflows are the areas where a company spends money. These could be operational expenses like salaries, rent, utilities, taxes, or debt payments.

  3. Subtract Cash Outflows from Cash Inflows: The difference between the total cash inflows and the total cash outflows is the cash flow.

If the result is positive, the company has a positive cash flow, meaning it has more cash coming in than going out. If the result is negative, the company has a negative cash flow, meaning it is spending more cash than it is earning.

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