Question

Aubey Aircraft recently announced that its net income increased sharply from the previous year, yet its...

Aubey Aircraft recently announced that its net income increased sharply from the previous year, yet its net cash flow from operations declined. Which of the following could explain this performance?

Question 5 options:

Which one of the following statements is correct concerning a corporation with taxable income of $125,000?

  • An increase in depreciation will increase the operating cash flow.
  • An increase in the tax rate will increase both net income and operating cash flow.
  • Net income minus dividends paid will equal the ending retained earnings for the year.
  • Net income divided by the number of shares outstanding will equal the dividends per share.
  • Interest paid will be included in investing cash flow.
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Answer #1
Question-1
The company's depreciation and amortization expenses declined.
As a result of decline in depreciation and amortization,the company's net income increased sharply from the previous year, yet its net cash flow from operations declined.
Question-5
An increase in depreciation will increase the operating cash flow.
Depreciation expense is added back to net income while calculating operating cash flow.
When depreciation will increase, the operating cash flow will also increase.
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