A business can be profitable but have negative cash flows.

Question

Quizplus · Accepted Answer

This is possible because cash flows are based on the actual cash coming in and going out, while profits are based on accounting principles and include non-cash expenses such as depreciation. A business can have a positive net income (profit) but still have negative cash flows due to factors such as delayed payments from customers, large investments in fixed assets, or high amounts of debt repayment.

A Business Can Be Profitable but Have Negative Cash Flows