A profitable contractor cannot meet payroll because receivables are late and suppliers require payment. What does this demonstrate?
- APayroll can be ignored until final payment
- BMore revenue always solves collection timing
- Forecast cash receipts and payments
- DProfit guarantees cash on hand
Why C is correct
Accrual profit can exist while cash is unavailable. A cash-flow forecast identifies working-capital needs, billing timing, retainage, collections, payroll, taxes, and supplier obligations.