A cash flow summary shows cash inflows of $10,000 and cash outflows of $12,000. Which is true?

A cash flow summary shows cash inflows of $10,000 and cash outflows of $12,000. Which is true?

• A. Net cash increase of $2,000
• B. Cash inflows exceeded cash outflows
• C. Cash outflows exceeded cash inflows
• D. Net cash flow is zero

Answer: (C)

When examining cash flow, you compare what comes in (inflows) with what goes out (outflows). If outflows are larger than inflows, there is a net cash outflow. In this case, inflows are 10,000 and outflows are 12,000, so the net cash flow is 10,000 minus 12,000 = -2,000. That negative result means cash outflows exceed cash inflows by 2,000, making the statement true that cash outflows exceeded cash inflows. It isn’t a net cash increase of 2,000, nor is it a zero net flow, and inflows did not exceed outflows.

When examining cash flow, you compare what comes in (inflows) with what goes out (outflows). If outflows are larger than inflows, there is a net cash outflow. In this case, inflows are 10,000 and outflows are 12,000, so the net cash flow is 10,000 minus 12,000 = -2,000. That negative result means cash outflows exceed cash inflows by 2,000, making the statement true that cash outflows exceeded cash inflows. It isn’t a net cash increase of 2,000, nor is it a zero net flow, and inflows did not exceed outflows.