short answer Some companies go out of business due to lack of cash flow. Even if they may have a lot of assets and minimal debt, without cash these companies cannot continue to operate. So the question is, if a company's net worth and net income are both positive, under what circumstances might it go out of business because of lack of cash flow?
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short answer
Some companies go out of business due to lack of
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- How can a company’s operations generate a healthy profitand yet produce meager or even negative cash flows?Can a company have a high net income but not enough cash to pay its bills? Explain your response. Give me one scenario or example to support your response.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?
- There is an old business saying that “You shouldn’t be inbusiness if your company doesn’t earn higher than bankrates.” This means that if a company is to succeed, its return on assets should be significantly higher than its cost of bor-rowing. Why is this so important?How to incease profitability in a service company if Operating cash does not cover debt?Consider 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?
- You are analyzing a startup company. Of course, it has a negative operating cash flow early on. But as you further analyze the company, what must you consider? Select an answer: Having a negative operating cash flow is fine if it is offset by investing activities. A negative operating cash flow is not a concern if the company has a significant amount of loans. A negative operating cash flow for a startup business is expected in the long-term. Having a negative operating cash flow is not sustainable in the long-term.Which of the following is true? Group of answer choices All of the other answers provided are false Solvency refers to how able the company is to pay its liabilities that are due in the next quarter Liquidity refers to how quickly the company can covert its assets into cash A company with greater financial flexiblity would be less able to survive during bad times1. How is it possible for a firm to be profitable and still go bankrupt? Select one: a. The firm has positive net income but has failed to generate cash from operations. b. Earnings have increased more rapidly than sales. c. Sales have not improved even though credit policies have been eased. d. Net income has been adjusted for inflation. 2. Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating return to shareholders? Select one: a. Gross profit margin and net profit margin. b. Return on investment and return on equity. c. Total asset turnover and operating profit margin. d. Return on investment. 3. What is the first step in an analysis of financial statements? Select one: a. Specify the objectives of the analysis. b. Do a common size analysis. c. Check references containing financial information. d. Check the auditor’s report. 4. What information does the auditor’s report contain? Select one: a. The results of…
- Can you identify a possible explanation for the company’s declining profits? If so, what is it?1. Explain and provide an example of how a company can generate lots of profits, but still go out of business because they don’t have any cash. 2. How would you state the basic goal of a non-profit firm?Questions: Does a low return on sales indicate a weak company? (Y/N). Explain your answer. Do greater Net sales always result in greater net income? (Y/N) Why? Examine the financial information above and comment on the item that you find interesting.