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How can the company, which is a profitable one, have insufficient cash flows? Explain your answer.

How can the company, which is a profitable one, have insufficient cash flows? Explain your answer.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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3.1.3

Question 3, Warm-Up 1-3 The Quickclick Media Ltd. announced that the profit for the previous year is twice the amount earned in the previous year, an improvement from the projected numbers. The chief human resources officer (CHRO) suggested that the employees need to be rewarded for their efforts. To keep them motivated, she insisted on giving them a significant cash bonus in the following month. The chief financial officer (CFO), however, contended that there was insufficient cash and that they should wait till the next quarter before paying each employee a cash bonus. How can the company, which is a profitable one, have insufficient cash flows? Explain your answer. How can the company, which is a profitable one, have insufficient cash flows? Explain your answer.
Transcribed Image Text:Question 3, Warm-Up 1-3 The Quickclick Media Ltd. announced that the profit for the previous year is twice the amount earned in the previous year, an improvement from the projected numbers. The chief human resources officer (CHRO) suggested that the employees need to be rewarded for their efforts. To keep them motivated, she insisted on giving them a significant cash bonus in the following month. The chief financial officer (CFO), however, contended that there was insufficient cash and that they should wait till the next quarter before paying each employee a cash bonus. How can the company, which is a profitable one, have insufficient cash flows? Explain your answer. How can the company, which is a profitable one, have insufficient cash flows? Explain your answer.
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