Suppose a Company Generally Records Revenues and Expenses Before Receiving

question 102

Multiple Choice

Suppose a company generally records revenues and expenses before receiving or making cash payments.Which of the following statements is not correct?

• A)If revenues are falling,a net loss could result even though the company reports a net cash inflow from operating activities.
• B)If revenues are rising,net income could result even though the company reports a net cash outflow from operating activities.
• C)Net income and net cash flows provided by operating activities will always agree.
• D)The income statement doesn't explain changes in cash because it focuses on just the operating results of the business.

---

Definitions:

Ending Inventory

The value of goods available for sale at the end of an accounting period after goods sold are subtracted.

August Sales

The total sales revenue generated by a business during the month of August.

Capital Expenditures

Long-term investments made by a company in buildings, equipment, or other assets to improve or maintain its operations.

Direct Materials Purchases

Expenditures for raw materials that are directly traceable to the manufacturing of a product and are a significant part of the production process.