Can a firm with positive net income run out of cash? explain. (select all the choices that apply.) a. a firm that has positive net income could never run out of cash. b. a firm can have positive net income but still run out of cash. c. for example, to expand its current production, a profitable company may spend more on investment activities than it generates from operating activities and financing activities. net cash flow for that period would be negative, although its net income is positive. d. it could also run out of cash if it spends a lot on financing activities, perhaps by paying off maturing long-term debt, repurchasing shares, or paying dividends.

Correct statements are:

B, C and D

Explanation:

A firm with positive net income can anytime run out of cash as the accounting net income is computed on accrual basis, and it is not necessary that all the related cash is collected.

Also the firm might spend a huge amount on investing in small companies, capital properties etc: which will again lead to huge cash outflow.

Financing activities generally bring the cash in the company, whereas after the financing instruments are matured, they need to be paid off. In that case, in year of maturity the entire amount will be paid which will involve huge cash outflow, and the company might run out of cash.

Therefore, all the statements except Statement A are correct.

Correct Statement are:

B, C and D

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.