Yes. Under accrual accounting, a business can report a profit while having too little cash available to meet payments. Profit reflects recognized revenue and expenses; cash availability depends on when money actually arrives and leaves.
The U.S. Securities and Exchange Commission distinguishes net income from cash flow and explains why financial statements reconcile the two. BDC illustrates the timing problem with a profitable sale whose customer has not yet paid, leaving the business short of cash.
Cash flow also includes movements that are not equivalent to profit, such as borrowing or repaying loan principal. A profit figure therefore cannot establish whether a business has enough cash available for its immediate obligations.
Profitability does not guarantee that cash is available when bills fall due.
U.S. Securities and Exchange Commission
The SEC explains that income statements report profit, while cash flow statements report cash movements. Operating cash flow reconciles net income with non-cash items and changes in operating assets and liabilities.
Based on: U.S. Securities and Exchange Commission
Business Development Bank of Canada
BDC describes how a sale with a positive profit margin can coexist with a negative bank balance because the customer has not yet paid.
Based on: Business Development Bank of Canada
U.S. Securities and Exchange Commission
The SEC identifies borrowing as a financing cash inflow and loan repayment as a financing cash outflow, illustrating why changes in cash cannot be read directly from net profit.
Based on: U.S. Securities and Exchange Commission
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No. Lower positive annual inflation means overall prices are rising more slowly than a year earlier. It does not mean the overall price level has fallen.