Apply your understanding of the relationships among the financial statements to answer these questions.

a. How can a business earn large profits but have a small balance of retained earnings?

b. Give two reasons why a business can have a steady stream of net income over a fiveyear period and still experience a cash shortage.

c. If you could pick a single source of cash for your business, what would it be? Why?

d. How can a business be unprofitable several years in a row and still have plenty of cash?