A company reported net income of $150,000 for 2014, but its cash balance decreased by $40,000. Which financial statement should management refer to for an explanation of this situation?
A)Balance Sheet
B)Income Statement
C)Statement of retained Earnings
D)Statement of Cash Flows

Question

Quizplus · Accepted Answer

The Statement of Cash Flows explains the inflows and outflows of cash for the company during a specific period. It shows how the net income from the Income Statement was converted into cash flow during the year. Therefore, by referring to the Statement of Cash Flows, management can identify the reasons behind the decrease in the cash balance, which may not be apparent from the Income Statement or other financial statements.

A Company Reported Net Income of $150,000 for 2014, but Its