Example: After reviewing financial statements of a company, you discover that their net income increased while operating cash flows decreased.
Can anyone explain and provide a brief demonstration of how that happens?
2007-02-05 02:22:46 · 6 answers · asked by Munch_101 1 in Business & Finance ➔ Other - Business & Finance
Net income includes assets & accounts receivable (AR). Cash flow is available (liquidated) capital. If the net income increased & cash flow decreased, the company has invested greater sums in business activities. Once AR's are cleared or assets (capital equipment, business property, etc) sold, the cash flow will increase. Cash Flow is included in Net Income.
2007-02-05 02:32:58 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Simplest explanation - The company has made more margin on sales but as yet has not received the money from the purchaser. These are Accounts Receivable, or simply money owed by customers.
There are several other reasons for this happening but the one above is the simplest.
2007-02-12 09:26:20 · answer #2 · answered by Anonymous · 0⤊ 0⤋
They may have had ‘one time’ income gains- sale of a subsidiary, property, patent, 'accounting change' etc. This would add to income without affecting cash flows, nor reflect on normal operations.
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2007-02-05 02:32:11 · answer #3 · answered by Bayou Brigadier 3 · 0⤊ 0⤋
Your net income may have increased due to other acquired assets to raise it.
Your cash may have decreased due to paying off an expense.
Hope it helps
2007-02-05 02:31:34 · answer #4 · answered by De 5 · 0⤊ 0⤋
confusing aspect. look into at yahoo or google. that will may help!
2014-12-08 19:26:21 · answer #5 · answered by Anonymous · 0⤊ 0⤋
c
2016-03-29 05:56:13 · answer #6 · answered by Anonymous · 0⤊ 0⤋