Which One of the Following Best Explains the Combination of a High

question 91

Multiple Choice

Which one of the following best explains the combination of a high level of net income combined with a low level of cash flow during an accounting period?

• A) High depreciation expense
• B) Reduction of inventory levels
• C) Acquisition of equipment
• D)Increase in accounts payable

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Definitions:

Asset Revaluation

The upward or downward adjustment of the book value of an asset to properly reflect its current market value.

Profits

The financial gain obtained when revenues generated from business activities exceed the expenses and costs associated with those activities.

Investor

An individual or entity that commits capital with the expectation of receiving financial returns, often through the purchase of stocks, bonds, or other investment vehicles.

Deferred Tax Liability

A tax obligation that a company owes but has not yet paid, arising from temporary differences between accounting and tax treatments of income and expenses.