Which of the following "red flags" indicates that a company may soon face a cash shortage?
A) Inventory turnover is too slow.
B) Debt ratio is high.
C) Cash flow from operations is consistently lower than net income.
D) Sales, receivables, and inventory are not moving together.

Question

Quizplus · Accepted Answer

Cash flow from operations is consistently lower than net income indicates that the company is not generating enough cash to cover its expenses. This can lead to a cash shortage if the company does not take steps to improve its cash flow.

Which of the Following "Red Flags" Indicates That a Company