10 Explain why a business with high 'sales revenue' might have a cash flow problem.

[Sir Afzal Shad]

10 Explain why a business with high 'sales revenue' might have a cash flow problem.[3]
Hint: High costs > The costs of generating those sales might be very high > The business could be spending more money than it receives each month.

[Fatima ibtehaj]

[KN]A business with high sales revenue might still have a cash flow problem if it doesn’t receive money from customers quickly enough or has high expenses that must be paid before cash comes in.
[APP]For example, a furniture company might sell a large number of items to retailers, giving them credit terms to pay after 60 days. Even though sales revenue looks high on paper, the business hasn’t yet received the cash. At the same time, it still needs to pay wages, rent, and suppliers.
[AN]This creates a cash flow gap and so the firm may face liquidity problems because of it which can reduce objectives like expansion etc which can decrease the firms morale.

[Abdullah Baig]

Kn
A business with high sales revenue can still face cash flow problems if its expenses are greater than the cash it receives
App
For example, a furniture manufacturer might record large sales but offer long credit periods to customers, delaying cash inflows while still having to pay high costs for raw materials and worker wages causing it to spend more money than it actually receives each month
An
Therefore, high sales revenue doesn’t always mean healthy cash flow, as poor timing between income and expenses can lead to problems

[Aarib Saad]

(KN)The business might have high cost of sales.
(APP)For instance, due to poor weather a farm might have needed to install an irrigation system such as new tube wells, so even if it had the same level of output and sales it's cost of output would have been extremely high, so it might have barely profited.
(AN)This in turn can cause inability of business to pay all of it's expenses, so it might have to get a loan, which will lead to poorer cash flow when the business will have to pay back loan with interest.

[Hajra]

K: A business with high sales revenue might still have cash flow problems if customers take time to pay.
App: For example, a furniture shop may sell many chairs on credit but not get the money quickly.
An: This means less cash in hand to pay bills, can cause delays in buying stock, and may even stop the business from meeting day to day expenses.

[shamaim shakeel]

[KN] A business with high sales revenue earns a lot from selling goods or services, but this doesn’t always mean it has a lot of cash available.
[APP] For example, a company like CocaCola might have strong sales, but it also spends heavily on advertising, transport, and ingredients.
[AN] This can cause cash flow problems because the costs of generating those sales may be very high, meaning the business spends more money than it receives each month, leaving it short of cash even though revenue looks high. 2 .KN] A business with high sales revenue means it sells a lot of products or services, but that doesn’t always mean it has enough cash in hand.
[APP] For example, a company like Dell might sell many computers on credit, so customers take time to pay.
[AN] This can cause a cash flow problem because the business has to pay wages, rent, and suppliers before it actually receives the money from those sales, leading to a shortage of cash even when revenue looks high.

[EmmanWaseem]

Increase in the sales revenue can create issue of the cash flow
There will be increase in costs so may get difficult to buy and sell products
Due to this there is a negative cash flow and number of types of products keep on increasing which can cause a tight budget for the business

[Uqbah hadeed kayani]

[kn] A business with high sales revenue can still face cash flow problems if money from customers is received late.
[app] For example, a furniture company might sell expensive items on credit and wait months for payment.
[an] This creates cash shortages for daily expenses, delays supplier payments, and increases the risk of borrowing to keep operations running.

[Arham Qadri]

[KN] Because of the delay in payment from customers
[APP] For example a car company might sell a sports car on credit and wait for long time for the money to be returned.
[AN] Hence expenses like wages and suppliers are due earlier, and too much cash is tied up in unsold inventory. These factors mean revenue doesn’t always translate into available cash.

[Abdullah Mohsin]

[KN] High costs
[APP] For example, the business may spend heavily on advertising campaigns to boost sales, but if these expenses exceed the revenue earned in the short term, it could struggle to cover day-to-day expenses like wages or rent.
[AN] This means that despite strong sales performance, the business may be required to take out loans, increasing the liability of the business, putting it at financial risk.

[Naveen fatima]

[KN] A business can earn high sales revenue but still face money shortages.
[APP]For example, a company might sell many products but allow customers to pay after a few months.
[AN]This causes a cash flow problem because money from sales is not received immediately. The business may struggle to pay wages, bills, or suppliers even though total sales look high. High revenue doesn’t always mean cash in hand, poor timing of payments can lead to cash shortages.

[Wahaj Ashraf]

[KN] The business has high costs and increased expenses which may create cash flow problems
[APP] the business may spend heavily on advertising campaigns to boost sales, but if these expenses exceed the revenue earned in the short term it will creates difficulty for the business to cover day-to-day expenses like wages or rent.
[AN] This means that despite strong sales the business may be required to take out loans increasing the liability of the business putting it at financial risk.

[Abdur Rehman khan]

[KN] A business might earn high revenue but still struggle with cash flow if it fails to control its expenses and costs.
[APP] For example, a company could spend heavily on advertising, rent, or raw materials, means most of its sales income is immediately used up to pay these costs.
[AN] This results in less available cash for daily operations the business may struggle to pay suppliers or employees on time worsening its relations, forcing it to rely on loans or overdrafts, which can worsen future cash flow.

[abdurrehman waseem]

KN: Cash flow measures actual money available, not just sales value.
App: For A business that sells goods on credit may have high sales but delayed payments.
An: This creates a cash shortage to pay wages or suppliers, showing that profit and cash flow are not always aligned.

[Aayan Zaidi]

KN: High sales revenue means the business sells a lot, but it doesn't always mean it has cash available.
APP: E.g if customers buy on credit, the business may wait months to get the money.
AN: So even with high sales, cash flow problems can happen if payments are delayed or costs are too high.