Machine-translated by Google. Questions are authored in English.
Top

Discussion

A profitable firm may still fail because

  • A.its equity is larger than its debt
  • B.it cannot meet its obligations as they fall due
  • C.its profit is recorded on the cash basis
  • D.its assets exceed its liabilities

Answer: B

Growth ties cash up in inventory and receivables faster than trading releases it, so a firm can trade profitably into insolvency. It is why the cash flow statement is read alongside the income statement rather than after it.

No comment is present. Be the first to comment.
Loading…

Post your comment

Please log in or register to post a comment.