Practicing Success
Practicing Success
CUET Preparation Today
| A firm is earning good profit but still, becomes bankrupt. Which of the following can be a probable reason for this situation? |
Net income has been adjusted against inflation. The firm has positive net income, but there is not sufficient cash generation Both 1 and 2 None of the above |
| The firm has positive net income, but there is not sufficient cash generation |
| A company can be profitable and still go bankrupt from cash flow problems. If they must pay for materials in January but don't get paid by their customers until June, they need a loan to survive until June. If they don't get that loan—even if they have guaranteed sales in June—then they will go out of business. |
