Can a company report net cash used in operating activities (that is, a negative cash flow amount) for the year even though it reports net income on its income statement? Explain.
What will be an ideal response?
Yes. The timing of recognition of revenues and expenses does not correspond exactly with the receipt and payment of cash. Thus, it is possible to have a negative cash flow and a positive net income or vice-versa.
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What will be an ideal response?