Is it possible for a company to have a positive cash flow but still be in serious financial trouble?

To answer this Financial Analyst interview question you can say:

Yes. There are two examples –

A company that is selling off inventory but delaying payables will show positive cash flow for a while even though it is in trouble

A company has strong revenues for the period, but future forecasts show that revenues will decline

When you define such situations, it proves that you are not looking at the cash flow statements; instead, you care about where the cash is coming from or going to and mark all the points highlighting how the company is making or losing money.