Problem:
You are a controller for a large corporation. When you present financial statements for the year to the board of directors, they are puzzled by the fact that the firm has had a very profitable year but does not have enough cash to pay its bills on time.
Required:
Explain to the board of the directors how a firm can be profitable, yet not have enough cash to pay its bills and dividends. (Please be thorough in your response.)
Note: Provide support for your rationale.