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BCom Tuition > Learn BCom Tuition > How is it possible for a company to show positive net...
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How is it possible for a company to show positive net income but go bankrupt?

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CA-Inter Cleared (Accounting Technician Executive)

The company may have more debtors due to which its income rises but the amount to be received decreases and it may go bankrupt if the amounts are not duely received from debtors hence it is said to maintain 2:1 ratio
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I t is possible in two ways ; one is deterioration in working capital(i.e increasing in accounts receivable and lowering accounts payable) and another reason may be financial shenanigans acts or actions designed to mask or represent the true financial performance or actual financial position of the company....
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I t is possible in two ways ; one is deterioration in working capital(i.e increasing in accounts receivable and lowering accounts payable) and another reason may be financial shenanigans acts or actions designed to mask or represent the true financial performance or actual financial position of the company. Financial shenanigans can be result of the creative interpretation of the accounting rule to outright fraud over many years! read less
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Prof. Mahendra Yadav (Get in touch for Accounts, Finance and Commerce subjects)

In Europe: One of the main reasons companies, with a positive net. income, going bankrupt is when banks stop the credit facilities of the company. Due to the current crisis banks are cutting credit facilities, and for the company going to another bank is impossible, because they do not give credit...
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In Europe: One of the main reasons companies, with a positive net. income, going bankrupt is when banks stop the credit facilities of the company. Due to the current crisis banks are cutting credit facilities, and for the company going to another bank is impossible, because they do not give credit facilities either. Example: Dozens of NL farmers went bankrupt because Deutsche Bank stopped with all small-business related loans in NL, and the farmers could not find any other bank to take over the credit facilities. read less
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Bankruptcy is related to covering of liabilities with assets.Company with positive income may not be able to settle debt if it has insufficient assets
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Related Questions

Hi priyanka this ....I am imparting accountancy concepts to school/graduation students since 5 years...after having a good exposure of face to face teaching, I would like to explore online teaching, can anybody suggest me how to start with online teaching. Regards Priyanka goel Prayas tutorials
Hi Priyanka you need a skype and good internet connectivity . In Urban Pro also has option of online class. Please tick the option so students can approach you for the same
Priyanka
Why are increases in accounts receivable a cash reduction on the cash flow statement?
because you are not receiving cash against the sale which means your debtors are increasing.In hindi we can say that paise ka na aana bhi jana hota hai.
Ravi Shankar
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7
What to do when my studies are dropped by 4 years and now I want to continue my graduation, can I?
Yes, you can continue.
Mohit
Can we do CA after BCOM?
You r a very good at studies in bcom go for Charted accountant otherwise leave🎂it
Abdul
 What is working capital?
it is the capital required to carry day to day functioning of business . it can be further calculating by using the formula as WC=CA-CL
Anil Sundar

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