A firm's cash flows will differ from net income each period for all of the following reasons except:
A) cash receipts from customers do not necessarily occur in the same period in which a firm recognizes revenues.
B) cash expenditures to employees, suppliers, and governments do not necessarily occur in the same period in which a firm recognizes expenses.
C) the company is sustaining losses each period.
D) cash inflows and outflows that pertain to investing and financing activities do not immediately flow through the income statement.

Question

Quizplus · Accepted Answer

The statement is asking for the exception, and the other three choices are all reasons why cash flows may differ from net income. If a company is sustaining losses each period, then the net income and cash flow will both be negative and there will not be a difference between the two. Therefore, choice C is the correct answer as it is the exception.

A Firm's Cash Flows Will Differ from Net Income Each