When a business earns net income

Question

Quizplus · Accepted Answer

When a business earns net income, it means that its revenues exceed its expenses. This results in more cash for the business which can be used for investments in future growth or buying more assets to generate more revenues. Option A is incorrect as it suggests the expenses exceed operating income, which is opposite to the definition of net income. Option C is incorrect as it states that cash flow from investing activities exceeds operating income, which is not necessarily true for businesses earning net income. Option D is incorrect as it mentions food & beverage inventories which are not necessarily related to net income.

When a Business Earns Net Income