Which of the following could account for a firm that has a negative net income,yet has a positive amount of cash provided by operations?
A) The net loss was greater than the amount of depreciation expense.
B) Inventory increased significantly more than accounts payable.
C) Accounts receivable decreased by significantly more than accounts payable.
D) The cash balance increased significantly.

Question

Quizplus · Accepted Answer

A negative net income indicates that the expenses were greater than the revenue, which means that in general, cash outflows were higher than inflows. However, if accounts receivable decreased significantly more than accounts payable during the period, it means that the firm collected more cash than it owed to its creditors, which results in a positive amount of cash provided by operations. This indicates that the firm's operating activities generated cash despite having a negative net income.

Which of the Following Could Account for a Firm That