Net Income for a Particular Period Does Not Equal Cash

question 48

Multiple Choice

Net income for a particular period does not equal cash flow from operations because

• A)most firms use the accrual basis of accounting to measure operating performance.
• B)most firms typically recognize revenue at the time of sale, independent of when they receive the cash from the sale.
• C)some firms receive cash before providing services and recognizing revenues.
• D)some firms receive cash after they have provided goods and recognized revenues.
• E)all of the above

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Definitions:

College Support

Financial assistance provided to students for education expenses, which may include scholarships, grants, and loans.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return, reflecting the time value of money.

Discount Rate

The discount rate is the interest rate used to determine the present value of future cash flows in discounted cash flow (DCF) analysis, essentially reflecting the cost of capital or the risk of the investment.

Cash Flows

The net amount of cash being transferred into and out of a business, essential for assessing its financial health.