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How is it possible for a company to show positive net income but go bankrupt?

How is it possible for a company to show positive net income but go bankrupt?

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Question added by Ahmad Tariq Bhatti , Chief Financial Officer , Costra Group
Date Posted: 2017/09/05
PRIYANT DHRANGDHARIYA
by PRIYANT DHRANGDHARIYA , Finance Head , The Kampala industries and Infrastructure Development Limited

If a company’s sales revenue increases too quickly without having financial resources to support that growth this can lead to a problem. This situation is called overtrading or undercapitalization. In this case, cash flow is a problem that arises where by company cannot pay its short-term obligation.

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