Which of the following statements is correct?
A)The bottom line on the statement of cash flows equals the change in the retained earnings on the balance sheet.
B)The reason the statement of cash flows is important is because cash is what pays the firm's obligations, not accounting profit.
C)If a firm has accounting profit, its cash account will always increase.
D)All of these statements are correct.

Question

Quizplus · Accepted Answer

The statement of cash flows is important because cash is what pays the firm's obligations, not accounting profit. The bottom line of the statement of cash flows does not necessarily equal the change in retained earnings, and having accounting profit does not always guarantee an increase in the cash account. Therefore, only statement B is correct.

Which of the Following Statements Is Correct