What does cash flow refer to?

Cash flow refers to the movement of money into and out of a business. This concept encompasses all cash transactions, including income from sales, expenses incurred, operational costs, and any other financial activities that affect the overall liquidity of the business. Understanding cash flow is crucial because it provides insight into the financial health of a company, helping to ensure that it has sufficient liquidity to meet its obligations, reinvest in operations, and strategically plan for future growth. By analyzing cash flows, businesses can make informed decisions about managing their finances effectively.

The other options, while related to aspects of financial management, do not fully capture the comprehensive nature of cash flow. Total revenue reflects only inflows from sales without considering outflows, deposits pertain specifically to banking transactions, and expenses are just a part of the cash flow equation, focusing solely on outflows rather than the complete movement of cash.