What happens when cash flows from operating activities are positive?

When cash flows from operating activities are positive, it indicates that the company is generating more cash from its core operations than it is spending. This is a crucial indicator of financial health, as it reflects the effectiveness of the company's business model in turning revenues into actual cash flow.

Positive cash flow from operating activities means that the company can cover its operational costs, invest in growth opportunities, and have the flexibility to pay liabilities and return cash to shareholders. It suggests that the company's day-to-day operations are profitable, which is vital for long-term sustainability and growth.

In contrast, the other options suggest scenarios that do not accurately represent the implications of positive cash flow from operating activities. For instance, losing money overall does not align with the positive cash flow from operations, as it suggests an operational profit. Excess inventory does not directly correlate with cash flow positivity, as this could occur in different cash flow contexts. Similarly, the inability to pay liabilities contradicts the notion of positive cash flows, indicating that there are likely sufficient funds available to meet financial obligations.