Company Profitability and Cash Flows
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A corporation's income statement shows a net income of $10,000 for the year, after income taxes. The statement of cash flows shows that its cash balance increased by $150,000:
- Net cash outflow from operating activities = $100,000
- Net cash inflow from financing activities = $50,000
- Net cash inflow from investing activities = $200,000
The president of the corporation has commented, "Even though the company's profit is small, it is clear, based on our positive cash flow, that we are doing quite well." Do you agree or disagree with the president's statement? Explain your answer.
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Solution Summary
Based on the statement of cash flows, this response comments on the statement, "Even though the company's profit is small, it is clear, based on our positive cash flow, that we are doing quite well."
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I disagree with this statement as there is a net cash outflow from operating activities of $100000. This means that the operations is using the cash instead of ...
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