How does Cash impact a companies profitabilty and margins?
I believe cash increases both the profitability and margins of a company and if cash decreases both profitability and margins increase as cash is an asset.

How do Receivables impact profitabilty and margins?
I believe receivables increases both the profitability and margins of a company and if receivables decrease both profitability and margins decrease as receivables is an asset.

How does inventory affect profitability and margins?
When inventory increases costs increase decreasing profitability and margins.

How do buildings and equipment affect profitability and margins?
I believe buildings & equipment increase costs decreasing both the profitability and margins of a company.

How do deferred income taxes affect profitability and margins?
Taxes are a liability and decrease both proftability and margins.

Am I correct??

There is no right or wrong answer…it's all grey.

Too little cash on hand can hurt a company, because how will they pay their bills?

However, too much cash on hand, and they aren't investing their money wisely and therefore losing out on potential new money.


With AR, the higher the AR, the higher the risk of uncollectible accounts.

Inventory has a higher costs as you point out.

As for land and buildings though…while it does cost some to buy the properties, they MIGHT help profits and margins. Why? If you pay 1,000 for your warehouse in rent vs. 900 for the warehouse you own in a mortgage payment, you are now saving money.


Deferred Income Tax means you have to pay tax in the future, and not today. Therefore that increase your profit since any interest earned on those savings is 100% yours to keep (minus the tax that is)

I certainly appreciate your response Captain and it is very helpful.

I think I am having such a hard time with finance because it has grey areas and varies by org. and industry.

Thank you again I feel now that I am grasping this information and becoming more confidence with Finance.