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T/F Earnings available to common shareholders is equal to a corporation's positive net cash flow over...

T/F Earnings available to common shareholders is equal to a corporation's positive net cash flow over a given period, typically one year.

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Answer #1

False.

Earning's available to common shareholders is determined by profit and loss account or income statement. However, net cash flow is determined by cash flow statement. Two figures, i.e.. net income and net cash flow can be different because of accrual concept of accounting. For ex : Credit Sales is considered as revenue even though cash is yet to be received. Hence, credit sales will increase net income however, cash flow for the period will not be affected as no cash is received yet.

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