Final answer:
A company's cash balance can increase even with negative cash flow through reinvesting, changes in external economic conditions, and financial activities like issuing equity. The cash reported on a bank's balance sheet may not be present due to fractional reserve banking practices. Additionally, a country's current account balance is influenced by the money flowing in and out of it.
Step-by-step explanation:
A company's cash balance could increase despite a negative cash flow from various factors. One example is reinvesting profits back into the business, which can lead to growth by improving existing facilities or by purchasing new technology that can generate future sales and thereby increase cash balances. Another involves external factors such as changes in government fiscal policies or macroeconomic conditions.
For instance, an increase in the government budget surplus and trade deficit in the late 1990s led to increased investment and a decrease in private savings, influencing financial markets and potentially affecting a company's cash position. Lastly, a company could engage in financial activities such as issuing new equity or debt, or selling assets, which can increase the cash balance without affecting the cash flow from operating activities.
Lastly, the current account balance of a country is affected by the flow of money in and out of the country; an increase in outflow, such as paying for imports, can lead to a more negative current account, while an increase in inflow has the opposite effect.