Question

How is it possible for a company to show positive net income but go bankrupt? Give one example.

Answer 1

Yes, it is possible for a company to show positive net income but go bankrupt.There are two types of bankruptcy. The first takes place when the company's outgoing cash is more than the cash which is incoming. It happens when companies stretch their business to complete a particular project and payment does not come in a timely manner. The second takes place when liabilities are greater than assets of an organization. In this case, the company can have a positive net income but cannot continue its business operations without help from investors or the court of bankruptcy.

Answer 2

It happens when companies stretch their business to complete a particular project and payment does not come in a timely manner. The second takes place when liabilities are greater than assets of an organization.