What term describes the difference between cash inflows and cash outflows?

The term that describes the difference between cash inflows and cash outflows is known as net cash flow. This concept is fundamental in finance and business management, as it represents the actual liquidity position of a business during a certain period. Positive net cash flow indicates that a company is bringing in more cash than it is spending, which is essential for maintaining operations, funding growth, and ensuring financial stability. Conversely, negative net cash flow suggests that a company is spending more than it is earning, which could lead to financial difficulties if it continues over time.

In contrast, cash balance refers to the amount of cash a business has at a specific point in time, rather than the flow of cash over a period, so it does not reflect the dynamics of cash transitions. Operating profit is a measure of profitability, calculating revenue from operations after deducting operating expenses but does not consider cash movements. Lastly, the liquidity ratio is a financial metric that assesses a company's capacity to meet short-term obligations but does not directly represent the flow of cash in and out of the business. This makes net cash flow the most appropriate term for the difference between cash inflows and outflows.