Quick Answer: What Happens If Net Income Is Negative?

What if income statement is negative?

Income Statement When the expenses exceed the revenues, the company has a negative income.

The company may receive revenues from sales of goods and services, dividends and interest.

A business usually has to pay out various expenses, such as cost of inventory, administrative expenses, taxes and interest on loans..

Can you have positive cash flow and negative net income?

It is possible for a company to have positive cash flow while reporting negative net income. If net income is positive, the company is liquid. If a company has positive cash flow, it means the company’s liquid assets are increasing.

What is negative revenue?

The loss of revenue whereby product returns and rebates exceed actual product sales.

Can you have a negative operating income?

The operating income of a company is the gross profit minus operating expenses. Gross profit is sales minus cost of goods sold. … Negative operating income is an operating loss, which means that cost of goods sold and operating expenses — combined or individually — are greater than sales.

What is an example of a negative cash flow?

Negative cash flow is when your business has more outgoing than incoming money. … For example, if you had $5,000 in revenue and $10,000 in expenses in April, you had negative cash flow. Negative cash flow is common for new businesses.

Should retained earnings be positive or negative?

If the cumulative earnings minus the cumulative dividends declared result in a negative amount, there will be a negative amount of retained earnings. This negative (or positive) amount of retained earnings is reported as a separate line within stockholders’ equity.

Is negative cash flow bad?

Negative cash flow means your business has more money going out than coming in. Money sources, like sales, cannot cover your expenses with negative cash flow. During periods of negative cash flow, your business is not profitable. Consistently having negative cash flow is not healthy for your business.

Can a company have negative free cash flow?

A company with negative free cash flow indicates an inability to generate enough cash to support the business. Free cash flow tracks the cash a company has left over after meeting its operating expenses.

Is revenue positive or negative?

How are they used? The revenues are reported with their natural sign as a negative, which indicates a credit. Expenses are reported with their natural sign as unsigned (positive), which indicates a debit. This is routine accounting procedure.

Why is revenue negative on trial balance?

Revenue has a normal credit (negative) balance. Thus, in a trial balance, net income has a credit balance and net loss has a debit balance. … I.e. a credit booked to revenue will increase revenue, which means it has a larger credit (negative) balance. They shouldn’t be booking revenue against expenses, however.

Is revenue always positive?

Revenue is a crucial part of financial statement analysis. The company’s performance is measured to the extent to which its asset inflows (revenues) compare with its asset outflows (expenses). … Though a company may have negative earnings, it almost always has positive revenue.