A firm may have a significant amount of net income,as computed by accountants on the accrual basis,and yet have a severe decline in cash.

Question

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This can happen if a large amount of the firm's net income is tied up in accounts receivable or inventory and has not yet been converted into cash. It can also happen if the firm has made significant investments or incurred large capital expenditures, which can temporarily decrease its cash balance.

A Firm May Have a Significant Amount of Net Income,as