What does cash flow indicate about a business?

Cash flow primarily indicates a business's liquidity position. Liquidity refers to how easily a company can convert its assets into cash to meet short-term obligations. Positive cash flow, which occurs when cash inflows exceed cash outflows, means that a business has enough liquidity to cover its expenses, invest in growth, and navigate unplanned financial challenges.

Maintaining healthy cash flow is critical for day-to-day operations, and it provides insight into the company’s ability to sustain itself without taking on additional debt. In contrast, weaker cash flow suggests potential difficulty in paying bills and other liabilities. Therefore, understanding cash flow is vital for assessing the financial health of a business and managing its operational efficiency.

The other options, while important aspects of a business's performance, do not directly relate to cash flow. Taxation levels depend on various factors beyond cash flow alone, market share refers to a company's portion of an industry or market, and customer satisfaction relates to the perception of customers toward the company's products or services.