When assessing the performance of a company, users of financial statements often look at the relationship between net income and cash from operations.
Instructions
a) Explain how it would be possible for a company to report a positive net income on the Statement of Income but a net cash outflow in cash from operations on the Statement of Cash Flows. Does the cash outflow in operations indicate that the company is in trouble?
b) Would the opposite situation be possible? Could a company that reported a loss on the Statement of Income report a positive cash flow from operations on the Statement of Cash Flows? Explain.

Question

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The Answer of When assessing the performance of a company, users of financial statements often look at the relationship between net income and cash from operations.
Instructions
a) Explain how it would be possible for a company to report a positive net income on the Statement of Income but a net cash outflow in cash from operations on the Statement of Cash Flows. Does the cash outflow in operations indicate that the company is in trouble?
b) Would the opposite situation be possible? Could a company that reported a loss on the Statement of Income report a positive cash flow from operations on the Statement of Cash Flows? Explain.

When Assessing the Performance of a Company, Users of Financial