my friend ask me that it can be possible to have a positive cash flow in company from operations in the same year as it has a net loss or to have a negative cash flow in the same year that it has a net income?can you give me answer in detail about this question...so i tell my friends about it..
Your books may show a trading profit but cash flow may be weak because of problems with customers not paying their invoices on time.
In terms of good cashflow when your are showing a net loss, not sure that this is possible. Your books are supposed to show up-to-date financial position and if they are showing a loss month on month, cash flow will be reduced as funds run out.
I think it is possible to show a net loss whilst achieving positive cashflow (i.e more money coming in than going out) but only if you are not paying your customers on time. The P&L statement is usually based on when invoices are completed rather than when cash is received or paid. For example, suppose in a particular month, you have the following figures:
Sales £1000 Purchases £2000 Payments to suppliers £500 Receipts from customers £900
this implies a net cashflow of £400 (£900-£500) and a net loss of £1000 (£2000-£1000). I know this is a very simplistic example but I am sure you get the general idea. The balance sheet will show a liability to your suppliers (creditors) of £1500 (£2000-£500) and the debtors balance will be £100 (£1000-£900). Of course I haven't taken into account stock levels, other expenses and opening balances, etc.
With accrual accounting it's easily possible and can be several reasons for it. Some examples...
Fixed assets and depreciation... depreciation in the year can help lead to a loss with no cash outflow. Purchase of fixed assets will have cash outflow with little expense in comparison.
Expense accruals or increase in creditors over the year will also increase expenses without a cash outflow.
Accrued income, work in progress will increase revenue without any cash inflow.
Prepaid expenses will increase the cash outflow but not affect the profit/loss.
All of this is pretty much seen in the Cash Flow Statement though most don't use this.
