During 2014, Boogle reported net income of $785 million and net cash inflow from operating activities of $1,196 million. During 2013, Boogle's net income was $563 million and net cash inflow from operations was $1,237 million. Which of the following is incorrect about the quality of income ratios?
A) In 2013 the ratio was 2.2 and in 2014 it was 1.5.
B) The ratio in 2013 was better than the ratio in 2014.
C)Boogle's quality of income ratios indicate poor performance because net income is less than cash flow.
D)The ratio in both years shows the company's ability to generate positive cash flow from its operating activities.

Question

Quizplus · Accepted Answer

The statement "Boogle's quality of income ratios indicate poor performance because net income is less than cash flow" is incorrect. A lower quality of income ratio (meaning net income is lower relative to cash flow) does not necessarily indicate poor performance. It may simply mean that the company has significant non-cash expenses (such as depreciation) or that it is investing heavily in its business. In fact, generating positive cash flow from operating activities in both years indicates that Boogle's operations are generating cash, which is a positive sign.

During 2014, Boogle Reported Net Income of $785 Million and Net