Final answer:
Negative cash flow occurs when a business spends more cash than it receives, potentially due to investments in new projects or expansions.
Explanation:
Negative cash flow occurs when a business is spending more cash than it is receiving, leading to a shortfall in funds. This can happen when a company invests heavily in new projects, acquisitions, or equipment, resulting in a temporary negative impact on cash flow.
For example, if a company decides to expand its production capacity by building a new factory, the initial cash outflow for construction and equipment could result in a negative cash flow until the factory becomes operational and generates revenue.
It is crucial for businesses to manage these periods of negative cash flow effectively to ensure their long-term financial health and sustainability.
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