Which of the following statements is true?

Question

A negative cash flow is definite sign that the company is near of bankruptcy
A negative cash flow means that there could have been a large investment
A negative cash flow means that the company is doing poorly
A negative cash flow is not a reliable indicator of anything

Answer 1

The statement that is true is:

A negative cash flow means that there could have been a large investment.

Negative cash flow can occur due to various reasons, including large capital expenditures for investments in growth or expansion. It does not necessarily indicate that a company is in financial trouble, as businesses often incur negative cash flow during periods of heavy investment before reaping future benefits.