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Most companies use the accrual basis of accounting, which recognizes income when it is earned rather than when cash is received. A company could be entitled to a lot of money for services performed, but find itself unable to collect it due to delinquent accounts. If a company is unable to generate sufficient cash flow, it's going to go under pretty quickly no matter what sort of income its reporting.

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Q: A reason why a company reports a significant net income but may be burning huge amounts of cash?
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