What a great series, honestly this is very well formatted and written. The explanation of each financial statement and key terminology is amazing, clear and concise!! One think I would like to understand more is the the relationship/between the three statements. These blogs have been incredible and so informative!!!!
Very well articulated, I love how you managed to summarise complex concepts into a simple and engaging article. I found this just in time for my Accounting exam retake too.
Very interesting question Abdul - there is a lot to unpack when dealing with negative cash flows. Negative cash flow is when your business has more outgoing than incoming money. This is quite common for new businesses as their expenses will outweigh their income until that business becomes profitable.
This leads me onto another point - You can make a net profit and have negative cash flow. For example, your bills might be due before a customer pays an invoice. When that happens, you may not have the cash to cover your expenses.
In conclusion, negative cash flow is common for new businesses. But, you can’t sustain a business with long-term negative cash flow. Over time, you will run out of funds if you cannot earn enough profit to cover expenses. To answer your question, if it is a one-off negative cash flow the business is not going bankrupt, however, if this is a persistent and unregulated issue, then there is no way around this problem and the business will be declared as bankrupt.
An informative read!!
Yet another great post Roni! Well written - concise yet detailed, very informative.
Lovely stuff! The entire blog is very cohesive and easy to follow, as well as being truly informative.
Can’t wait to see read more!
What a great series, honestly this is very well formatted and written. The explanation of each financial statement and key terminology is amazing, clear and concise!! One think I would like to understand more is the the relationship/between the three statements. These blogs have been incredible and so informative!!!!
Great series ! What’s planned next ?
Really good for general knowledge and exams. Much appreciated keep up the good work.
Hope to see some more good blogs just like this one.
Very well articulated, I love how you managed to summarise complex concepts into a simple and engaging article. I found this just in time for my Accounting exam retake too.
Thanks Roni, keep up the good work :)
Amazing piece, the jargon I see on companies house is making far more sense now!
Very interesting question Abdul - there is a lot to unpack when dealing with negative cash flows. Negative cash flow is when your business has more outgoing than incoming money. This is quite common for new businesses as their expenses will outweigh their income until that business becomes profitable.
This leads me onto another point - You can make a net profit and have negative cash flow. For example, your bills might be due before a customer pays an invoice. When that happens, you may not have the cash to cover your expenses.
In conclusion, negative cash flow is common for new businesses. But, you can’t sustain a business with long-term negative cash flow. Over time, you will run out of funds if you cannot earn enough profit to cover expenses. To answer your question, if it is a one-off negative cash flow the business is not going bankrupt, however, if this is a persistent and unregulated issue, then there is no way around this problem and the business will be declared as bankrupt.