When sodium metal is added to water, an orange flame is observed on the metal surface. based on this observation, what can best be concluded?

All you can conclude is that something must be burning with an orange flame.

Actually, the "something" that must be burning is the hydrogen that is produced when the sodium reacts with the water:

2Na + 2H₂O → 2NaOH + H₂ + heat

So much heat is produced that the hydrogen catches fire and some of the sodium evaporates into the flame.

The electrons in the sodium atoms get "excited" in the flame. When they drop back to a lower energy level, they emit energy in the form of an orange-yellow light.