Give some examples of situations in which you would use horizontal and/or vertical analysis.© BrainMass Inc. brainmass.com October 1, 2020, 4:38 pm ad1c9bdddf
<br>Is it possible for a company to have a profit and a negative cash flow at the same time? Yes it is possible. Even though the income statement and the statement of cash flows are linked, they show different things. The income statement focuses on revenues, while the statement of cash flows focuses on the inflow and outflow of cash. Lets say that a company that sells merchandise has a year end of December 31, 2003. What if they have a huge rush of sales at the end of the year? Lets say that they sold $1 million of goods on December 30, 2003. This means that they would have an extra $1 million of revenue on their income statement for the year. However, most people do not pay their bill right away. They will usually receive the statement about a month later, and will pay their bill after that. So, as far as the statement of cash flows is concerned, the only thing that has happened with regards to the 2003 fiscal year is a large outflow of cash has occurred relating to the company's initial purchase of the goods for resale. This is an example, where they could have a profit, but also have negative cash flows at the same time.
<br>First some background info:
<br>The statement of earnings shows how much revenue a company brings into the business by providing goods or services, or both, to its customers for a set time (usually one year). It also shows the costs and expenses associated with earning that revenue during that time.
<br>In an annual report, the statement of earnings shows sales revenue and expenses for at least the last three years. The net earnings (or loss) , often literally the "bottom line" on the statement, shows how much the company earned (or lost).
<br>The statement of cash flows reports the flow of cash into and out of a company in a given year.
<br>Cash is a company's lifeblood. Cash includes ...
This problem involves the fundamentals of accounting