Quiz Ch 11 – T/F Disconnection Between Net Income and Payment Ability
Financial Accounting
Thomas, Tietz, and Harrison
12th Edition
A company might encounter payment issues despite reporting a high net income.
A company might encounter payment issues despite reporting a high net income.
When using the indirect method to prepare the statement of cash flows, a decrease in a non-cash current asset implies a deduction from net income when calculating the net cash provided by operating activities.
The direct method statement of cash flows includes depreciation expense due to its impact on income.
The operating section of the Statement of Cash Flows, using the indirect method, starts with net income and then presents adjustments to reconcile net income with the net cash provided by operating activities.
A cash flow statement cannot aid in forecasting future cash flows.
Profitable businesses require both net income and robust cash flows.
The statement of cash flows is also acknowledged as an optional statement.
The direct method of reporting operating cash flows on the statement of cash flows is favored by both the FASB and IASB.
The cash flow statement clarifies the changes in the cash balance during a specified period.
A cash flow statement records a company’s cash inflows and outflows at a specific moment.