The first places to look for trouble signs are in the cash flow statements. When cash payments exceed cash income, the company's cash flow is negative. If cash flow stays negative over a sustained period, it's a signal that its cash could be running low and is insufficient to cover bills and other obligations (Mcclure, 2020, P.1). If a company is experiencing a loss every month, then that is a sign that it is in distress but if it has profited every month then that is a sign that the company is very successful. Working capital could decline as payables become higher than receivables and inventory which is a sign of distress. This is why your company needs to have a really high inventory turnover ratio to get sales in quickly and get them paid quickly leading to the DSO. Interest repayments can put pressure on cash flow, and this pressure is likely to be exacerbated for distressed companies. Because they have a higher risk of defaulting on their loans, struggling companies must pay a higher interest rate to borrow money. As a result, debt tends to shrink returns (Mcclure, 2020, P.1). But low debt is a sign of a successful company.

Do you agree or disagree. please explain.