An increase in sales and profits generates the necessary cash required for economic growth of a company.

Question

Quizplus · Accepted Answer

An increase in sales and profits does not automatically generate the necessary cash since profits are an accounting measure and do not directly equate to cash flow. Cash flow depends on the timing of cash receipts and payments, and a company can be profitable but still face cash shortages if its cash outflows outpace its cash inflows.

An Increase in Sales and Profits Generates the Necessary Cash