What is a deficit in a cash-flow statement?

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Multiple Choice

What is a deficit in a cash-flow statement?

Explanation:
A deficit in a cash-flow statement means negative net cash flow—the cash going out is greater than the cash coming in during the period. It shows up when expenses exceed income, so the cash balance falls. This focuses on actual cash movements, not just whether you’re profitable on paper. Even with positive profit on the income statement, you can still have a cash-flow deficit if cash outflows outpace inflows due to timing or changes in working capital, signaling you may need to tap reserves or borrowings to cover shortfalls.

A deficit in a cash-flow statement means negative net cash flow—the cash going out is greater than the cash coming in during the period. It shows up when expenses exceed income, so the cash balance falls. This focuses on actual cash movements, not just whether you’re profitable on paper. Even with positive profit on the income statement, you can still have a cash-flow deficit if cash outflows outpace inflows due to timing or changes in working capital, signaling you may need to tap reserves or borrowings to cover shortfalls.

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