Which of the following statements is not true?
A)If a firm is operating profitably, it will automatically have plenty of cash.
B)The concept of cash underpinning the statement of cash flows is 'cash and cash equivalents.'
C)A bank overdraft is an example of a 'cash equivalent.'
D)Cash is the pre-eminent asset as it is the medium with which claims are normally settled.

Question

Quizplus · Accepted Answer

A firm can be profitable but may not have cash on hand due to various reasons such as slow-paying customers, high inventory levels, and large investments in fixed assets. Profitability and cash flow are two distinct concepts, and one does not guarantee the other.

Which of the Following Statements Is Not True