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Profit is not cash flow:
Adequate cash is essential to keep business running. Inadequate cash increases the risk of not being able to meet current obligations as and when they arise which is dangerous to the company. There are many instances when businesses failed because of lack of cash flows even if they were profitable. Vice versa also hold good. Under accrual system of accounting net income (revenue less expenses) does not equate net positive cash flows. The difference is the timing of sale; expenses and profit do not coincide with their associated cash flows. Hence there is always a discrepancy between profit and net cash flow.A statement of Cash Flows is an essential component of Financial Statements. As the profit and loss account and the balance sheet are prepared on accrual basis, the profits disclosed by the profit and loss account do not indicate the liquidity of the firm. A firm may be highly profitable but may find itself with hardly any cash or working capital to continue the operating cycle. On the contrary, a loss making firm may have sufficient cash flows.
Which of the following transaction results in an increase in revenues? a. receipt of accounts receivable b. purchase of inventory c. receipt of principal from bank loan d. delivery
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The maximum possible loss method Under this method, a table is set up to compute the amounts payable to each partner. The results of the computation may be then posted into the
O'Neill Co. has $298,106 in accounts receivable on January 1. Budgeted sales for January are $840,001. O'Neill expects to sell 20% of its merchandise for cash. Of the remaining 80%
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As discussed earlier, the base case public sector comparator (PSC) will be a benchmark for different project bidding proposals when choosing the preferred bidder to provide the bes
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The following information for the six months ended 31 December 2009 relates to the business of Mr N Morris: a) Opening cash (including bank) balance Rs 1,200 b) Productio
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