cash flow...please help?

Question

in one of my classes we have been given the opportunity to run a simulated business. my company is doing well...its profitable, we have a strong product line, a credit rating of A, our stock increases yearly, we have acceptable leverage, and have been retaining earnings...but we have cash flow problems. could our cash flow issues be coming from the fact that we are investing too much into improving our plant? is it possible we are trying to do too much too fast? and that these improvements are being funded from stock sales instead of RE?

thanks alot...

i had done a cash flow statement...our receivables are being collected within our allowed time frame...our payables are paid...so im guessing its investing in the plant too much thats the problem. maybe ill take a break and see if it improves. thanks!

Answer 1

Do a cash flow statement and you can see the problem. Maybe you are paying your payables but not collecting your receivables or you could be spending it on improvements that don't effect profit or loss yet.