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a company can be cash flowing while in serious trouble. As long as fixed costs are being met and there’s a positive contribution margin, cash can be generated.
scenario 1.
The company is genuinely in trouble and have a cash flow problem, for this it needs to control over operational activities because if its operational cash flow is in negative than there is a chance of going concern issue. Also need to increase the financing activities, there is a possibility to lending the borrowings from bank to cop with the temporary cash flow, other possibilities are also there depends on the financial position of the company.
Scenario 2
The company wants a window dressing and want to show just the negative cash flow in positive way, then one way is to revalue its fixed assets and create a reserves which will affect its equity as well as the figures in the cash flow. Again I must say without getting the full scenario its is not easy to suggest anything authentic, as all the financial statements are inter-related and one must consider all the aspects while making any decision. Also the environmental factors.
I think it will unethical to do that. Financial Statements are supposed to show a true and fair presentation. Cash flow ratios can be improved by little tweaking in provisions, inventory calculation and stuff like that. It would be little difficult to do the same with the Statement of Cash flow. But there is possibility of classifying some expenses and purchases as investing items and then one can make related party transactions in order to make things little shiny on the outside.
In fact it could be a quite difficult in this case you are referring to have the positive cash flow unless a good financial management to be done for the company with an expert .In grave trouble many nu-needed types of expenses and to fix purchasing less priority fixed assets. Increasing sales, decreasing COGS will be some of best the practices.
Yes it is possible - e.g. A company reports a net loss of 100k, and has reported non cash expenses as ---50k as depreciation, 50k as prepaid expenses, 50k as write off it will show a positive cash flow of 50k.
An investor has to look in to complete set of financials (Bsheet / Income statement and Cashflows) - the customer should see positive cash flows but should not get hit by losses.
Yes, temporary positive cash flow. Easiest answer the company is selling its long term assets and the source of the cash flow in this case will be investment activities, however, cash flow from operations (company core business) could be negative
Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves lack of revenues going forward in the pipeline
Cash inflows arise from 3 categories:
cashflows from normal operations which is the cash generated from the Company's normal operations (example collection of cash, longer payment of payables)
cashflows from financing activities which refers primarily from borrowing or cash inflow/outflow to finance liquidity within the Company (example, external borrowing or bank borrowings)
cashflows from inventing activities whcih refers primarily from cashflows from investments in asset. (e.g. purchase of equipment, capital infusion from owners)
To answer the question, cash inflows may still be positive for a Company even if it is entirely in trouble since even if cash inflows from operations are negative. There are still cashflow inputs that may come from its financing and investing activities such as debt utlization and capital infusion.
it could be resolve through sale and lease back the fix asset
