If a Company Reports a Large Amount of Net Income

question 69

Multiple Choice

If a company reports a large amount of net income on its income statement during a year, the firm will have

• A)positive cash flow.
• B)negative cash flow.
• C)zero cash flow.
• D)all of these choices are correct.

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Definitions:

LIFO Inventory Method

An accounting technique where the most recently acquired items of inventory are recorded as sold first, often used to calculate cost of goods sold and ending inventory.

Merchandise Inventory

The goods and products a company holds for the purpose of selling to customers.

FIFO Inventory Method

An approach to valuing inventory that assumes the first items purchased are the first ones sold, leading to older inventory costs being assigned to cost of goods sold.

Cost of Goods Sold

Costs incurred directly from producing the goods a company offers, encompassing labor and material expenses.