Depreciation expenses
19. What effect will the declaration and distribution of a stock dividend have on net income and cash flows? (Points : 2)No effect on net income or cash flowsNo effect on net income, decrease cash flowsDecrease net income, decrease cash flowsIncrease net income, no effect on cash flows
Cash dividend paid has nothing to deal with net income as net income is calculated first and after that it is distributed. If cash dividend is received then it is included in net income calculations and increases the net income.
Net income included the non cash items as well while in net cash from operations only cash items are included and net income is adjusted for non cash items.
cash is not net income,it is part of wealth and can be used further in earning profit.
Depreciation expenses
While calculating cash flow from operating using indirect method, Loss on sale of equipment is added back to net income as due to loss there is no cash outflow occurs.
19. What effect will the declaration and distribution of a stock dividend have on net income and cash flows? (Points : 2)No effect on net income or cash flowsNo effect on net income, decrease cash flowsDecrease net income, decrease cash flowsIncrease net income, no effect on cash flows
Cash dividend paid has nothing to deal with net income as net income is calculated first and after that it is distributed. If cash dividend is received then it is included in net income calculations and increases the net income.
Net income included the non cash items as well while in net cash from operations only cash items are included and net income is adjusted for non cash items.
cash is not net income,it is part of wealth and can be used further in earning profit.
Net cash flow and net profit is not same due to inclusion of non cash items in net income that's why net income is adjusted for non cash items while preparing cash flow from operating activities.
Net cash provided by operating activities can be find out by adjusting the net income amount from income statement for non-cash items.
Net cash flow is the difference between income and expenditure.
NNP=GNP-depreciation
Yes, cash flow can be positive while net income is negative.
Depreciation Expense reduces net income and has no effect on cash flow.