course hero may we have a situation in which a firm has a positive net income but no cash?

Can a company have a positive net income but negative cash flow?

A company can have a positive net income but a negative cash flow for the same year if it uses the accrual method of accounting to record revenues and expenses. Under the accrual method of accounting, net income can be increased by non-cash revenues that don't affect cash flow, whereas cash flow can be decreased by actual cash payouts ...

How do you calculate a firm's cash build?

Use the following information to determine a firm's cash build: net sales = $150,000; net income = $15,000; beginning-of-period accounts receivable = $60,000; end-of-period accounts receivable = $90,000; and interest = $10,000.

Can a company have a positive cash flow and a loss?

If a company has a net loss for the period and has a large depreciation expense amount added back into the cash flow statement, the company could record positive cash flow, while simultaneously recording a loss for the period.

How do payables affect net income?

However, in the year of paying off an outstanding payable, the cash payouts have no impact on net income, but will reduce cash flow for the year. If large amounts of payables are all due in the same year, their total cash payouts could cause cash flow to be negative.

What is the part of a venture's interest payment that is subsidized by the government because of the de?

What is a cash burn?

How to calculate sale to cash conversion period?

What is asset intensity?

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Module 5 Exercise: Profitability Flashcards | Quizlet

Study with Quizlet and memorize flashcards containing terms like T/F Cross-sectional analysis is used to examine a venture's performance over time, T/F If a firm has a positive net income, a drop in a venture's asset intensity ratio will increase its ROE, Which measures the efficiency of putting working capital to work? a. inventory turnover b. working capital turnover c. total asset turnover ...

Chapter 5 Quiz questions Flashcards | Quizlet

Study with Quizlet and memorize flashcards containing terms like Industry Comparables Analysis a. Used to examine a venture's performance over time b. Used to compare a venture's performance against the average performance in the same industry c. Used to compare a venture's performance against another firm at the same point in time, Trend Analysis a.

A venture has net sales of $400,000, cost of goods sold of $200,000 ...

A venture has net sales of $400,000, cost of goods sold of $200,000, operating expenses (selling, general, and administrative) of $100,000, and interest - 14885964

Solved Use the following information to determine a firm's | Chegg.com

Business; Finance; Finance questions and answers; Use the following information to determine a firm's "cash build:" net sales = $150,000; net income = $15,000; beginning-of-period accounts receivable = $60,000; end-of-period accounts receivable = $90,000; and interest = $10,000. $10,000 $15,000 $30,000 $60,000 $120,000

What is the part of a venture's interest payment that is subsidized by the government because of the de?

T or F? The part of a venture's interest payment that is subsidized by the government because of the deductibility of interest is called the interest tax shield.

What is a cash burn?

T or F? "Cash burn" is the cash a venture expends on its operating, financing, and depreciation expenses.

How to calculate sale to cash conversion period?

T or F? The sale-to-cash conversion period is calculated by dividing average revenues by net sales per day.

What is asset intensity?

T or F? Asset intensity is the net after-tax profit divided by total assets.

What Is Positive Cash Flow and Negative Net Income?

If a company has positive cash flow, the company's liquid assets are increasing. Net income is the profit a company has earned, or the income that's remaining, after all expenses have been deducted. Net income is commonly referred to as the bottom line since it sits at the bottom of the income statement. Yes, there are times when a company can have positive cash flow while reporting negative net income. But first, we'll need to explore how cash flow and net income relate to each other.

When analyzing a company's financial statements, it is important to review all aspects of the company's financial?

When analyzing a company's financial statements, it is important to review all aspects of the company's financial position, including net income and cash flow. Only through a comprehensive analysis of all the financial statements can investors make an informed decision.

What are some examples of positive cash flow?

Real World Example of Positive Cash Flow and Negative Net Income 1 JC Penney had a negative net income (or loss) for the period of $78 million, highlighted in red. 2 However, at the bottom of the statement, highlighted in green, the company posted a positive cash position of $181 million.

What happens if a company sells an asset?

If a company sells an asset or a portion of the company to raise capital, the proceeds from the sale would be an addition to cash for the period. As a result, a company could have a net loss while recording positive cash flow from the sale of the asset if the asset's value exceeded the loss for the period.

When do accrued expenses occur?

Accrued expenses occur when a company records an expense for purchasing an asset but does not have to pay for it until the next period. Expenses are recorded at the time they are incurred, not when they are paid. For example, a company might record a substantial expense in Q4 but not have a cash outlay until the next year when the invoice is paid. As a result, the company might post a net loss in Q4 while maintaining a positive cash position.

How to calculate net income?

Net income is calculated by subtracting the costs of doing business including expenses, taxes, depreciation, and interest on debt from total revenue . If net income is positive, the company is liquid and has a higher probability of paying off its debts, paying dividends to shareholders, and paying its operating expenses.

Is net income a negative or positive?

Yes, there are times when a company can have positive cash flow while reporting negative net income.

What would happen if a company paid cash for expenses and had no other cash inflows for the year?

Assuming that a company paid cash for expenses incurred and had no other cash inflows for the year, given that revenues exceeded expenses, the company would have a positive net income, but a negative cash flow for the year. Advertisement.

What Is Net Income?

Net income is an accounting profit that is not measured by cash receipts and cash payouts, and it's one of the important income statement items. Companies may make credit sales and receive no cash payments from customers at the time, but still record revenues in computing net income. Meanwhile, companies record no cash inflows from the sales.

What is considered total cash flow?

Total cash flow also includes cash outflow from non-operating activities, specifically investing and financing activities. Investment purchases and the return of borrowed principal are two main sources of cash outflows. While investment losses from investment sales in investment activities and interest expense on borrowed funds in financing activities are subtractions for net income, the amount of investment purchases and the amount of principal payback are bigger subtractions for calculating cash flow. The larger the difference between the two types of subtractions in their relative amounts, the more likely cash flow may become negative and net income maintain positive.

Why do companies make cash payments?

Companies also make cash payments to reduce operation-related liabilities, namely various payables. Payables are the results of accrued expenses from earlier periods that have not been paid in cash. At the time of the expense incurrence, net income was reduced, while cash flow was not affected.

Can a company have positive net income but negative cash flow?

A company can have a positive net income but a negative cash flow for the same year if it uses the accrual method of accounting to record revenues and expenses. Under the accrual method of accounting, net income can be increased by non-cash revenues that don't affect cash flow, whereas cash flow can be decreased by actual cash payouts ...

Does paying off a payable affect net income?

However, in the year of paying off an outstanding payable, the cash payouts have no impact on net income, but will reduce cash flow for the year. If large amounts of payables are all due in the same year, their total cash payouts could cause cash flow to be negative. Advertisement.

Can non-cash income be negative?

As a result, while sufficient non-cash revenue may help achieve a positive net income, enough non-expense cash payouts can lead to negative cash flow, all else being equal.

What is the part of a venture's interest payment that is subsidized by the government because of the de?

T or F? The part of a venture's interest payment that is subsidized by the government because of the deductibility of interest is called the interest tax shield.

What is a cash burn?

T or F? "Cash burn" is the cash a venture expends on its operating, financing, and depreciation expenses.

How to calculate sale to cash conversion period?

T or F? The sale-to-cash conversion period is calculated by dividing average revenues by net sales per day.

What is asset intensity?

T or F? Asset intensity is the net after-tax profit divided by total assets.