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there are many reasons. like purchase of fixed assets, purchase of Stock, investment, alot of prepayments, If you see the cash flow statement it will clearly give you the real picture where the cash has been used .
In this case we have to get the variation between the balances in beginning and ending of the period from the balance sheet .
and we have many reasons for that like may be the balances of debitors are high .
What I understand from your question is that you are talking about dividends.
You don’t have to pay dividends in the year that the profits are made. The maximum amount that can be paid out as a dividend is a running balance of the accumulated profits (less any accumulated losses), less the accumulated dividends previously paid, from the date the Company started.
For Example
In Year1 your company made profits after tax of £20,000 but did not pay any dividends and, in Year2, you made further profits of £30,000 after tax. You could declare a dividend at the end of Year2 of £50,000.
Short answer: Income statement isn't enough, Review the cash-flow statement for so many reasons.
If there is an rxpansion plan the whole profit may go the reserves. Sometimes the company can offer shares to the company co owners in leu of cash. The company keepsthe money which it needs. The shareholders gain more shares that is oppertunity to earn much more in the future.
Assets, credit sales and payments that have to be made.
Profits are different from cash. A company may make profits but do not have cash for many reasons such as credit sales to customers
Profits are different from cash. A company may make profits but do not have cash for many reasons such as credit sales to customers, paying depts, or assigning cash as capital reserve or any other leagally accepted reason.
There can be different reasons causing this.
profit at the end of the fiscal year don’t have to be monetary, the profit may be cash or add it assets or new fixed assets.