Why Does Accounting of Income Differ from Cash Flow

question 70

Essay

Why does accounting of income differ from cash flow?

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Definitions:

Sales Percentage

A metric that shows what portion of a company's total sales is made up of a particular product or service.

Degree of Operating Leverage

A metric that measures a company's sensitivity of operating income to its sales, indicating the impact of fixed and variable costs.

Contribution Format Income Statement

An income statement that separates fixed and variable costs to highlight the contribution margin.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its revenues, indicating the proportion of fixed costs in the company's cost structure.