If a corporation's cash flows are consistently lower than net income, it could be a sign of a cash shortage in the future.

Question

Quizplus · Accepted Answer

A consistent gap between net income and cash flows could indicate that the company is not generating enough cash from its operations to support its expenses and investments. This could lead to a cash shortage in the future, which may require the company to rely on external financing or sell assets to generate cash.

If a Corporation's Cash Flows Are Consistently Lower Than Net