What is a potential risk of having a significant amount of Deferred Revenue?

Having a significant amount of Deferred Revenue may indicate positive cash flow problems because it represents cash that has been received for goods or services that have not yet been delivered or performed. This can create a situation where a company has received cash, but it may struggle to convert that cash into earned revenue if it is unable to fulfill the corresponding obligations in a timely manner.

Deferred Revenue can also be a sign of potential sales that may not materialize as expected, leading to concerns about the sustainability of cash flow over time. If a company receives cash upfront but faces challenges in delivering on its commitments, it risks encountering cash flow issues in the future when cash deficits arise due to decreased revenue recognition.

The other options suggest different situations that are less directly related to the implications of Deferred Revenue itself. Tax liabilities typically arise from recognized income, and operational expenses are more related to the cost of running the business rather than the revenue recognition schedule. Similarly, while Deferred Revenue can temporarily impact cash reserves, the actual drastic reduction is not a direct consequence of having deferred revenue but rather depends on other financial factors.