It is possible for a company to post a healthy net income but still not have the cash needed to pay its employees, suppliers, and creditors.

Question

Quizplus · Accepted Answer

Net income is calculated as revenue minus expenses, but it doesn't necessarily reflect cash flow. A company may have outstanding accounts receivable, meaning they've made sales that haven't been paid for yet, or they may have significant debt payments due, which could limit their cash reserves. Therefore, it's possible for a company to have a healthy net income but still struggle to have enough cash on hand to meet their financial obligations.

It Is Possible for a Company to Post a Healthy