Final answer:
Cash flow shows the amount of cash available to a company to meet expenses, invest, or distribute as profits, providing a measure of the company's liquidity and financial health.
Step-by-step explanation:
The statement "cash flow shows how much cash is available to cover expenses, invest, or take as profits" refers to a company's cash flow, a key financial metric. It represents the amount of cash that a firm generates and uses during a specific period, including all cash inflows and outflows related to its operations, investments, and financing activities. Cash flow is crucial for assessing a firm's liquidity, flexibility, and overall financial health, as it indicates the firm's ability to generate cash to fund operations, expand the business, and return value to shareholders in the form of dividends or stock buybacks.
Positive cash flow means that a company has more money coming in from business activities than is going out as expenses, which is essential for a company's survival, especially during tough economic times or periods of low profits. It ensures that a company can continue operating without the need to secure external financial capital. On the other hand, negative cash flow indicates that a firm's liquid assets are decreasing, which could lead to financial difficulties if not managed properly.The term that shows how much cash is available to cover expenses, invest, or take as profits is profits. Profits are the financial gains that a business makes after deducting all expenses from its revenues. It represents the amount of money left over after all costs have been paid. For example, if a business has total revenues of $50,000 and total expenses of $40,000, its profits would be $10,000.