ACC 281 Week 5 DQ2 - 7432

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Can a company experience a net loss, but have positive cash flows? Provide an example of a scenario that might cause this. What would this tell you about the company?

Can a company experience a net loss, but have positive cash flows? Provide an example of a scenario that might cause this.

Yes. This would be possible if the organizations net loss was due to depreciation. Depreciation would be added back into the net income figure to create a gain. What this means is that the organization must have been showing a positive earning and the depreciation figure resulted in the net loss if that is not the case then this will not be possible.

What would this tell you about the company?

This would tell me that the organization must have purchased some new capital equipment that is offsetting the net loss resulting in a negative impact to the bottom line.

 

 

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Can a company experience a net loss, but have positive cash flows? Provide an example of a scenario that might cause this. What would this tell you about t