A company can be highly profitable yet not have enough cash on hand at the right times to pay its bills.

Question

Quizplus · Accepted Answer

A company's profitability, which is the ability to generate income, does not directly correlate with its cash flow, which is the actual inflow and outflow of cash. A company can be profitable on paper due to revenue recognition but may experience cash shortages due to timing differences in receiving cash from customers and paying out expenses.

A Company Can Be Highly Profitable Yet Not Have Enough