Company A reports sales of $100,000 and net income of $15,000.Company B reports sales of $100,000 and net income of $10,000.Therefore
A) Company A's cash flow may be higher or lower than Company B's cash flow even though A's net income is higher.
B) Company A's cash flow is $5,000 more than Company B's cash flow.
C) Company B is creating less value for its shareholders than Company A.
D) Company B's accounts receivable must be higher than Company A's accounts receivable.

Question

Quizplus · Accepted Answer

Net income is not the only factor that determines cash flow. There may be differences in operating costs, depreciation, or other factors that affect cash flow. Therefore, Company A's cash flow may be higher or lower than Company B's cash flow even though A's net income is higher.

Company a Reports Sales of $100,000 and Net Income of $15,000.Company