Net Cash Provided by Operating Activities that are consistently lower than net income may imply that:
A)a dividend has not been issued in a long time.
B)the common stock should be split.
C)the company may be facing a cash shortage.
D)working capital has decreased.

Question

Quizplus · Accepted Answer

When net cash provided by operating activities consistently falls below net income, it may suggest that the company may be facing a cash shortage. This could be due to an increase in accounts receivable, inventory, or other current assets that have not translated into cash yet. It could also be due to an increase in current liabilities, such as accounts payable or short-term borrowings. In either case, it suggests that the company is not generating enough cash from its operations to cover its expenses, which could lead to financial difficulties if not addressed.

Net Cash Provided by Operating Activities That Are Consistently Lower