Consider the dilemma you might someday face if you are the chief financial officer of a company that is struggling to maintain a positive cash flow, despite the fact that the company is reporting a substantial positive net income. Maybe the problem is so severe that there is often insufficient cash to pay ordinary business expenses, like utilities, salaries, and payments to suppliers. 

Required:  

Discuss the paradox of this situation. How can a company have a positive net income, but is not able to pay ordinary business expenses?

Answer rating: 100% (QA)

Answer Net Income Income Expense Under Accrual Method of Accounting Company can record Income earlie... View the full answer