Cash flow is the quality assurance of enterprise net profit. Only the cash flow on the account is the real profit of the enterprise. Otherwise, undistributed profit is just a figure in the balance sheet, because many of this figure is artificially created.
In this case, the first thing I will think of is whether the company's operating performance is accurate? Has the company recovered all its debts? Are there any unsold stocks? Did the company really make money?
The main reasons for this phenomenon are:
1. Does the company have any accounts receivable, including accounts receivable, prepayments, bills receivable and other accounts receivable? If there is a balance of accounts receivable on the books, the company shall immediately organize collection to recover the accounts receivable. If undistributed profits stay on accounts receivable, it is negative for enterprises.
2. Whether the company's accounting treatment is true and accurate, whether there is deviation in the results of accounting profits every year, and whether the company has falsified income, omitted or understated costs, resulting in inflated profits. For example, accounts receivable with inflated income have nowhere to collect, just fooling themselves; Another example is not to invoice regardless of cost; Of course, there are other factors that inflate profits. These factors directly affect the result of inflated profits, and then affect the unreality of undistributed profits, so it is impossible for enterprises to make money.
3. Whether the company's inventory has been completely processed. If the inventory has been disposed of, it can be ignored. And if the company's inventory has not been completely processed, it will be disposed of and realized to recover the cash.
4. Whether the accounting of fixed assets is accurate and whether the depreciation of fixed assets is gradually transferred to the product cost. If depreciation of fixed assets is withdrawn on a monthly basis, there will not be much difference between the net value of fixed assets and the variable price income from the disposal of fixed assets, and even if the net value of fixed assets will appreciate, the greater the income will be.
Therefore, there are a lot of undistributed profits in the company's book, but the balance of book funds plus the income obtained after the liquidation of fixed assets is not enough to repay the payables. On the one hand, it shows that there are some problems in the company's accounting and financial management, on the other hand, it also shows that the company has not made money, and it is difficult to repay the accounts payable without making money.