Question Details

Interpreting Financial Statements: Cash Flows C4. Business Application ▶ Having been promoted recently, you now have access to your firm’s monthly financial statements. You notice that revenues are increasing rapidly and that income is at an all-time high. The balance sheet shows growth in receivables, and accounts payable have declined. However, the chief financial officer is concerned because the firm’s cash flows from operating activities are decreasing. 

 What are some reasons why a company with a positive net income may fall short of cash from its operating activities? 

 What could be done to improve this situation?