Why Can There Be a Substantial Difference Between Net Income

question 34

Multiple Choice

Why can there be a substantial difference between net income and free cash flow?

• A) Capital expenditures are not fully included in the net income calculation.
• B) Free cash flow includes accrual items not found in net income.
• C) Free cash flow does not deduct the same expense items as net income.
• D) Net income only flows to retained earnings, while free cash flow can be used to pay dividends.

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Definitions:

Staff Planners

Professionals who are responsible for developing plans and strategies to achieve an organization's long-term goals and objectives.

Communication Gap

A situation where there is a lack of effective exchange of information between two or more parties, leading to misunderstandings or conflicts.

Staff Planners

Individuals responsible for devising plans and strategies within an organization to achieve specific goals.

Participatory Planning

A planning process that involves the input and active participation of all stakeholders, ensuring their needs and perspectives are considered.