If a firm shows a profit on the quarterly income statement, then _____.

Question

Quizplus · Accepted Answer

A firm showing a profit on its quarterly income statement does not necessarily mean it won't need additional financing, that its cash balance will increase, or that it won't have other financial needs. Profits on the income statement are an accounting measure and do not directly translate to cash flow. Additional financing might be needed for expansion, investment, or to cover gaps between receivables and payables. Cash balance can be affected by many factors other than profit, such as capital expenditures, debt repayment, and changes in working capital.

If a Firm Shows a Profit on the Quarterly Income