Help Lucy explain to Marion how a company can show a profit on their income statement yet show little to no positive cash flow on their statement of cash flow
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Help Lucy explain to Marion how a company can show a profit on their income statement yet show little to no positive cash flow on their statement of cash flow
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- Is it possible for a company to have significant net income in the same time period that net cash flows are negative? Explain.The following shows excerpts from financial information relating to Aspen Company and Bergamot Company. Compute the following for both companies. Compare your results. A. free cash flow B. cash flows to sales ratio C. cash flows to assets ratioConsider the dilemma you might someday face if you are the chief financial officer of a company that is struggling to maintain a positive cash flow, despite the fact that the company is reporting a substantial positive net income. Maybe the problem is so severe that there is often insufficient cash to pay ordinary business expenses, like utilities, salaries, and payments to suppliers. Assume that you have been asked to communicate to your board of directors about your companys year, in retrospect, as well as your vision for the companys future. Write a memo that expresses your insights about past experience and present prospects for the company. Note that the challenge of the assignment is to keep your integrity intact, while putting a positive spin on the situation, as much as is reasonably possible. How can you envision the situation turning into a success story?
- The following shows excerpts from financial information relating to Stanwell Company and Thodes Company. Compute the following for both companies. Compare your results. A. free cash flow B. cash flows to sales ratio C. cash flows to assets ratioIs it impossible for a company to report positive net income on the income statement but have negative cash flows from operating activities on the statement of cash flows? Yes or No? Thanks :)Is the Profit that a business makes a reliable indicator of its cash balances? What are the differences between Profit and Cash? (please, for detailed answer, thank you !)
- Undeniably, profitability is the ultimate goal of companies and readers of a company’s financial statements are very much interested in the reported profit figure. The profit figure is achieved by the preparation of the statement of profit or loss and the statement of financial position. If the foregoing is the case, why then bother about the statement of cash flows?The statement of cash flows is useful to the analyst because__________. Select one: a. focusing on net income can be misleading if a company has a healthy profit, but cannot translate the profit into cash b. the statement of cash flows reveals why a company was able to generate a profit c. it is the only source in statement of comprehensive income for learning about cash generation d. focusing on net income is truthful if a company has a healthy profit and it can translate the profit into cashAnswer the following questions for the directors: True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans?
- True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans?Discuss and explain the difference between profit/loss and cash flow. How could a company have positive cash flow, but show a net loss at year end? What are some examples of industries and/or companies that might generate subtantial cash flow, but could lose money? Conversely, what are some examples of industries and/or companies that might generate very limited cash flow, but could show a profit at year end?Your managers showed you the income statement for your company. The income statement shows a net income of 5.4%, yet your manager says the company will need to borrow money to meet their financial obligations. How is this possible? Please address the following issues in your discussion this week: How can a company make a profit and still be short of cash? In accrual accounting, we record sales when they occur, not when the cash is collected. How does this affect cash flow? How does the purchase of fixed assets or additional inventory adversely affect cash flow?
