What does a positive cash flow indicate about an organization?

A positive cash flow indicates that an organization has more cash inflows than outflows. This situation is generally a sign of financial health, as it shows that the company is generating sufficient revenue from its operations or other activities that exceed its expenses over a particular period. Positive cash flow allows an organization to reinvest in its business, pay off debts, distribute dividends to shareholders, or build up cash reserves for future use.

In contrast, the other options do not accurately reflect the meaning of positive cash flow. Being in debt does not inherently relate to cash flow; an organization can be solvent and still manage debt successfully. Likewise, needing to increase liabilities or experiencing losses would suggest a negative cash flow situation, where outflows surpass inflows. Therefore, the correct interpretation of positive cash flow specifically points to a healthful scenario where inflows exceed outflows, contributing to the organization’s overall stability and growth potential.