Financial Planner Question: Download Questions PDF
Tell us is it possible for a company to show positive net income and still go bankrupt?
Answer:
Absolutely. A company that's experiencing a deterioration of working capital (i.e. decrease in accounts payable, increase in accounts receivable) can show positive net income but be in financial trouble in the future. It's also possible to show positive net income while in financial trouble by manipulating financial statements (e.g. revenue recognition, expense recognition, etc.)
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