Why can't a decision-maker use sales revenue and expense information provided on the income statement as a measure of cash inflows and outflows from operating activities?
Sales revenue and expense information can not provide sufficient information about a company's cash inflows and outflows because they are reported on the income statement using the accrual-basis of accounting.
The income statement reports sales revenue earned, which will not necessarily be equal to the amount of cash actually collected from sales during the same period. Likewise, expenses are reported on the income statement when incurred, which will not necessarily coincide with the cash payment of those expenses. In addition, there may some items on the income statement that will never affect cash from operating activities such as depreciation expense and gains and losses from the sale of property, plant, and equipment.
You might also like to view...
Stockholders' equity includes only Common Stock and Paid-In Capital in Excess of Par
Indicate whether the statement is true or false
Lucy wants a divorce from her husband but he wants to stay in the marriage. She threatens to bring a false criminal lawsuit claiming physical abuse from him if he does not sign the divorce papers. This is an instance of ________
A) fraud B) duress C) undue influence D) scienter
Questions designed to understand why an interviewee wants to work for a particular organization are known as _____.?
A) ?technical interview questions B) ?behavioral questions C) ?standard interview questions D) ?competency questions
The IRR is the compounded annual rate of return that a firm will earn if it invests in a project and receives the estimated cash inflows
Indicate whether the statement is true or false