Houston Chambers
How can a company have high earnings, but negative operating cash flow ?
How can a company have high earnings, but negative operating cash flow ?
Public Comments
- Easy. High expenses. Economics 101.
- If the company's earning are in the form of receivables or sales that have yet to be collected then negative cash flow is entirely possible if the company pays cash for its expenses. Something like: 1. Lots of sales but no collections (income but no cash) 2. Expenses paid (cash goes out) The effect would be a high income (Sales/Revenue - Expenses) but less cash (because they paid expenses). The reason would be because income/earnings is measured/recorded even if no cash has been transferred.
