Kramer Corporation recently announced that its net income was lower than last year. However, analysts estimate that the company's net cash flow increased. What factors could explain this discrepancy?
A) The company's depreciation expense increased.
B) The company's interest expense declined.
C) The company had an increase in its noncash revenues.
D) Answers a and b are correct.
E) Answers b and c are correct.

Question

Quizplus · Accepted Answer

An increase in depreciation expense, which is a non-cash charge, would reduce net income but not affect cash flow, potentially explaining why net cash flow increased despite lower net income.

Kramer Corporation Recently Announced That Its Net Income Was Lower