Question

ABC Ltd. reported net profits of ₹12 lakh, but their cash from operations was only ₹3 lakh. The company made large purchases of inventory and extended high credit to customers. Which aspect of the financial statements does this situation highlight and what should an analyst infer from it?

A Profitability – indicates excellent cash flow
B Liquidity – high working capital
C Accrual Accounting – profits ≠ cash flows
D Efficiency – better inventory turnover
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