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How can a company make a net profit and still be short

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Reference no: EM133522257

Questions: Your managers showed you the income statement for your company. The income statement shows a net profit margin of 5.4%, yet your manager says the company will need to borrow money to meet their financial obligations. How is this possible? Please address the following issues in your discussion this week:

. How can a company make a net profit and still be short of cash?

. In accrual accounting, we record sales when they occur, not when the cash is collected. How does this affect cash flow?

. How does the purchase of fixed assets or additional inventory adversely affect cash flow?

Reference no: EM133522257

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