"I Give Up," Your Friend Moaned in Frustration After His

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The Answer is Net income is based on accrual accounting, whereas the cash from operations reflects the cash inflows and outflows for the company related to operating activities.Due to the application of the matching principle expenses and revenues may be recognized on the income statement at different times from the cash outflows or inflows that relate to them.Items that would cause net income to be higher than cash from operations are when costs related to the operations have been incurred before they are expensed or revenues that have been earned but not yet received in cash.For example, if a company purchases a three-year insurance policy and pays for it at the beginning, it would cause cash to decrease by the full amount, but it would only be expensed over the three years, so net income would not be decreased as much in the same period.For revenues, any amount sold on credit that is still outstanding at year-end would cause net income to be greater than cash.Negative cash flows from operations are very common in start-up situations when costs incurred and investments required are large before sales catch up, and as my friend is only in his second year, this might be the case.So I don't think he should give up yet.

"I Give Up," Your Friend Moaned in Frustration After His

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