A company may appear to be profitable on its income statement, but fail to generate strong cash flows.

Name: A company may appear to be profitable on its income statement, but fail to generate strong cash flows.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This can occur if a company has high non-cash expenses (such as depreciation) that reduce net income on the income statement, or if it has significant amounts tied up in inventory or receivables, which impacts cash flow but not profitability.

A Company May Appear to Be Profitable on Its Income