In a Statement of Cash Flows:
A) net cash flow from operating activities is always the same as net income.
B) net cash flow from operating activities must be the same as net increase in cash during the period.
C) net cash flow from operating activities is always greater than net income.
D) net cash flow from operating activities is always less than net income.
E) net cash flow from operating activities may be less than or greater than net income.

Question

Quizplus · Accepted Answer

Net cash flow from operating activities may be less than or greater than net income because there are certain non-cash expenses such as depreciation, amortization, and deferred taxes that are added back to net income to arrive at cash flow from operations. Additionally, changes in working capital items like accounts receivable, accounts payable, and inventory can significantly impact the cash flow from operating activities. Therefore, the net cash flow from operating activities can be different from net income.