If a Company Has Gaps Between the Change in Cash

question 36

Multiple Choice

If a company has gaps between the change in cash and the net income for the year,

• A)the income statement provides sufficient explanation for the sources of these changes.
• B)the financial statement notes provide explanation for the sources of these changes.
• C)the statement of cash flow provides explanation of the sources of these changes.
• D)the statement of cash flow and balance sheet provide explanation for these changes.

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Definitions:

Liquidity

The facility of making an asset cash without changing its market value.

Operating Cash Flow

The cash generated from the normal operations of a business, reflecting how much cash is produced by the business's core operations.

Depreciation Expense

The distribution of a physical asset's cost over its expected lifespan for tax and accounting reasons.

Net Working Capital

The gap between a firm's existing assets and its short-term obligations, showcasing its liquidity and ability to run efficiently in the near term.