A firm’s net income may be greater than its net cash flows because the firm Question options: sold merchandise on credit did not pay dividends deferred income taxes deducted depreciation expense

Finance Aug 30, 2020

A firm’s net income may be greater than its net cash flows because the firm

Question options:

	sold merchandise on credit
	did not pay dividends
	deferred income taxes
	deducted depreciation expense

Expert Solution

The answer is "sold merchandise on credit"

Reason: when goods are sold on credit they are counted in the income and sales of the year in which they are sold while cash is received later on, due to which income gets increased while the net cash flow gets decreased due to increase in current assets(debtors ).

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