Why do you keep messing me up with Ca va ? It literally means It goes, doesn't it ?
My opinion: "Ça va" is a great example of an idiomatic expression. You are right: It can mean/be translated by "it/that goes". It can also means "OK", "fine", "all right"and "well enough".
I think an equivalent, not a translation, is "OK". Think of all the different meanings, depending on tone of voice, that "OK" carries.
Mizotte and clairfaerie are definitely right. It's an idiomatic expression that means "It goes?" or "It goes." that is used as a greeting meaning "How are you?" and "I'm fine." At least, that's what French teachers tell us. But it doesn't need to be that complicated or memorizational. Instead, think of this: we have our own very similar idiomatic expression greeting- "How's it going?" and "It's going well." Exact same thing- doesn't make much sense. What's going? What's it? But it doesn't matter. Just think of "Ca va" as "How's it going?". Same words and same meaning- both idiomatic expressions.