All of the following are true of negative cash flow from operations except:
A) Negative cash flow from operations, if sustained, will spell bankruptcy.
B) Negative cash flow from operations virtually always warrants investigation.
C) Negative cash flow from operations in a single year is not necessarily a danger signal.
D) Negative cash flow from operations: is normal for a profitable company.

Question

Quizplus · Accepted Answer

Negative cash flow from operations is not necessarily a danger signal if the company is profitable. This is because a profitable company may be investing heavily in growth opportunities, resulting in temporary negative cash flow from operations. However, sustained negative cash flow from operations can eventually lead to bankruptcy if the company is unable to generate sufficient cash inflows to cover its cash outflows.

All of the Following Are True of Negative Cash Flow