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38. A positive net income mean that the firm has generated positive cash flow. True or...

38. A positive net income mean that the firm has generated positive cash flow. True or False

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Answer #2

A positive net income mean that the firm has generated positive cash flow. This statement is false. It is not necessary that if a firm is having positive net income, the firm has generated positive cash flow. It may be possible that a firm has positive net income but its cash flow is negative. Cash flow may be negative due to large expenditure on purchase of fixed assets like plant and machinery or repayment of debt.

On the other hand,it may be possible that a firm has negative net income but its cash flow is positive. Cash flow may be positive due to sale of fixed assets like plant and machinery or issue of shares or debt.

Hence, the given statement is false.

answered by: anonymous
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