When net income is low relative to operating cash flows,we describe the firm as having recorded:
A) income-decreasing accruals.
B) income-increasing accruals.
C) income neutral accruals.
D) abnormal accruals.

Question

Quizplus · Accepted Answer

When a company has low net income relative to operating cash flows, it suggests that the company has recorded expenses in its income statement that have not yet been paid. These expenses are called "accruals," and they can decrease net income in the short term while increasing operating cash flows. Therefore, the company is likely recording income-decreasing accruals.

When Net Income Is Low Relative to Operating Cash Flows,we