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Yes. If the company has debt service (principal payments on loans) that exceed the cash generated from operations, it could also run out of cash. Also, if the company is spending cash on other assets, such as machinery and equipment, or building up inventories, they could be profitable and still run out of cash.
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Can cash flow from operation be positive if net income is negative?
Yes, cash flow can be positive while net income is negative.
What is net income and net cash flow?
Net Income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. It can refer to the total of all the flows involved or to only a subset of those flows.
What effect will the declaration and distribution of a stock dividend have on the net income and cash flows?
19. What effect will the declaration and distribution of a stock dividend have on net income and cash flows? (Points : 2)No effect on net income or cash flowsNo effect on net income, decrease cash flowsDecrease net income, decrease cash flowsIncrease net income, no effect on cash flows
How to calculate net income when cash dividend is given?
Cash dividend paid has nothing to deal with net income as net income is calculated first and after that it is distributed. If cash dividend is received then it is included in net income calculations and increases the net income.
What is the difference between net cash provided by operating activities and net income?
Net income included the non cash items as well while in net cash from operations only cash items are included and net income is adjusted for non cash items.
Is cash net income?
cash is not net income,it is part of wealth and can be used further in earning profit.
Describe the general relationship between net income and net cash flows from operating activities for the firm?
Net income is the change in owners represents the change in owners' equity during a period. This does not include the effects of any additional investments or withdrawals by the owners. Cash flow is the movement of cash in or out of a business, project of financial product.
Why is that net income does not equal cash provided by operations?
Net cash flow and net profit is not same due to inclusion of non cash items in net income that's why net income is adjusted for non cash items while preparing cash flow from operating activities.
How do you find the net cash provided by operating activities?
Net cash provided by operating activities can be find out by adjusting the net income amount from income statement for non-cash items.
What is the net cash flow?
Net cash flow is the difference between income and expenditure.
What is difference between Net Income and Net Operating Income?
Net operating income (must be a positive number, otherwise would be net operating loss) is the amount after expenses have been deducted out of sales, BUT before INTEREST and INCOME TAXES have been deducted (also called EBIT: Earning before Interest and Taxes). Therefore, the difference is that Net operating income includes interest and income tax expenses, where as Net Income does not include it. Sales (-)CGS Gross profit (-)Operating expenses/depreciation Net operating Income (EBIT) (-)Interest and income taxes Net Income
What effect does depreciation expense have on net income and cash flow?
Depreciation Expense reduces net income and has no effect on cash flow.
