Question

In: Accounting

On liquidity: How can a profitable company (defined as positive net income on a US GAAP...

  1. On liquidity: How can a profitable company (defined as positive net income on a US GAAP income statement) fail due to lack of cash? How is that even possible?
  2. On earnings quality: How is it possible that profit and operating cash flow could diverge? Doesn't cash flow increase when profit increases, and vice-versa? What are some scenarios that could cause divergence?
  3. On improper income recognition: What does it mean "whether income has been improperly recognized, only to be reversed in the future."? How could a company try to get away with improperly recognizing income?

Initial response

For your initial response, become Jim Kramer and in this role, respond to any ONE of the three questions posed as if you were answering as Jim might answer during his visit to Clarkson. (If you are not familiar with Jim, take some time to study his persona but most importantly, respond at a level that could be understood by a novice business student.)

Solutions

Expert Solution

Here are the answers:

ekkarill92 answered 1 year ago
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