S1-14. (Learning Objectives 2, 4: Applying accounting concepts, assumptions, and principles to explain business activity) Apply your understanding of the relationships among the financial statements to answer these questions.

a. How can a business earn large profits but have a small balance of retained earnings?

b. Give two reasons why a business can have a steady stream of net income over a six-year period and still experience a cash shortage.

c. If you could pick a single source of cash for your business, what would it be? Why?

d. How can a business lose money several years in a row and still have plenty of cash?