The existence of the Deferred Tax Liability account indicates that the company lacked sufficient cash to pay its tax bill.

Question

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The existence of a Deferred Tax Liability account does not necessarily indicate that the company lacked sufficient cash to pay its tax bill. It indicates the difference in timing between the recognition of profits or losses and the tax consequences, which can lead to the recognition of tax liabilities or assets that will be paid or received in the future.

The Existence of the Deferred Tax Liability Account Indicates That