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PreprintCC BY 4.0Zenodo

Profitability and Cash Flow: Why Profitable Companies Can Face Cash Shortages

  • Haram Furqan1
  1. 1Association of Chartered Certified Accountants
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Abstract

This study examines the paradox of profitability versus liquidity, explaining why profitable companies can still face cash shortages. It analyzes the impact of working capital management, credit sales, inventory buildup, and capital expenditure on cash flow. The research highlights key differences between accrual-based profit and cash-based liquidity using financial ratios and practical examples from corporate finance. The findings are relevant for ACCA Financial Management students and professionals managing cash flow forecasting.

Keywords: Cash Flow, Profitability, Working Capital, Liquidity, ACCA

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Cite

BibTeXRIS
BibTeX
@misc{furqan2026profitability,
  title = {{Profitability and Cash Flow: Why Profitable Companies Can Face Cash Shortages}},
  author = {Haram Furqan},
  howpublished = {Zenodo},
  year = {2026},
  month = oct,
  doi = {10.5281/zenodo.23617121},
  url = {https://zenodo.org/records/23617121},
  note = {CC BY 4.0},
}
RIS
TY  - UNPB
TI  - Profitability and Cash Flow: Why Profitable Companies Can Face Cash Shortages
AU  - Haram Furqan
PY  - 2026
DA  - 2026/10/24
PB  - Zenodo
DO  - 10.5281/zenodo.23617121
UR  - https://zenodo.org/records/23617121
AB  - This study examines the paradox of profitability versus liquidity, explaining why profitable companies can still face cash shortages. It analyzes the impact of working capital management, credit sales, inventory buildup, and capital expenditure on cash flow. The research highlights key differences between accrual-based profit and cash-based liquidity using financial ratios and practical examples from corporate finance. The findings are relevant for ACCA Financial Management students and professionals managing cash flow forecasting.  Keywords: Cash Flow, Profitability, Working Capital, Liquidity, ACCA
ER  -