Understanding Net Cash Flows in Financial Statements: Key to Measuring Short-Term Liquidity and Financial Health

The difference between cash _____ and cash _____ is called net cash flows and represents the change in cash during the period.

inflows and outflows

The difference between cash inflows and cash outflows is called net cash flows and represents the change in cash during the period. Cash inflows are the cash receipts of an organization, while cash outflows are the cash payments made by it. The net cash flow is the difference between the total cash inflows and the total cash outflows. A positive net cash flow indicates that the organization has more cash inflows than outflows, while a negative net cash flow shows the opposite. Net cash flows are an important aspect of financial statements as they help business owners and investors to evaluate the company’s liquidity, financial health, and ability to meet its financial obligations in the short-term.

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