How can a company have their net income increase but also have their cash flow decline at the same time.?

Question

How can a company have their net income increase but also have their cash flow decline at the same time.

Answer 1

Income may be due, but not paid.  Income could be other than cash, such as stocks.

Answer 2

Purchases and Sales are usually recorded when the sale is made, not when the cash is received ...

Say, for example, I buy £10,000 stock on 30 days and sell it at £15,000 on 90 days ..

My 'Net Income' is £5,000 ... however if I pay up when I should and don't get paid until expected, after 30 days my Cash Flow goes £10,000 'negative' untill 60 days after that it goes £15,000 positive (for a net balance of £5,000).

Of course I know this, so I will have arranged with my Bank for a £10,000 overdraft to cover the 60 days ..

Now consider a business with thousands of transactions a day and what might happen if one or two large buyers delayed payment ?