Special Inc. reported net income of $150,000 for 2012, but its cash balance decreased $40,000. Which financial statement should Special's management refer to for an explanation of this situation?

Question

Quizplus · Accepted Answer

The statement of cash flows explains the changes in cash balance during a period by identifying the sources and uses of cash. Therefore, by referring to the statement of cash flows, Special's management can identify the reasons behind the decrease in cash balance despite reporting net income.