Which of the Following Should Be Deducted from Net Income

question 25

Multiple Choice

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

• A) A decrease in inventory
• B) A decrease in accounts payable
• C) Preferred dividends declared and paid
• D) A decrease in accounts receivable

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Definitions:

Net Income

The final profit figure for a company after deducting taxes and expenses from the revenue.

Dividend Payout Ratio

The dividend payout ratio is the fraction of net income a firm pays to its shareholders in dividends, expressed as a percentage of the company's total net income.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Profit Margin

A financial metric that measures the percentage of revenue remaining after all expenses have been deducted from sales.