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does going concern means a company which is close to bankruptcy???what does going concern exactly means????? also the indicators such as negative cash flows,90% of sales from only one customer,growth in competition,no credit terms from suppliers!!these are indicators of going concern or NON-going concern???
The going concern assumption is that the organisation will continue into the foreseeable future. This is the normal basis on which FS are drawn up.
Negative cash flow, tough competition, bank borrowing not renewed, suppliers demanding cash on delivery etc are all indications that the business might not be a going concern.
thank u sir!
therefore non-going concern means a company close to bankruptcy?what about a company which has huge profits??is this a going concern company???
Yes, close to bankruptcy.
Large profits should mean that there is not a going concern issue, but cash flow difficulties are usually the cause of company failure and healthy profits do not necessarily mean good cash flows. For example, the company might have spent too much cash on non-current assets or dividends.
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