Answered: xplain to Paulo Jr. two reasons why…

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Accounting

xplain to Paulo Jr. two reasons why these two numbers are usually different and provide an example for each difference?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

iii. Paulo Jr. wonders why the profit after tax is not the same as the cash flows from operating activities. Explain to Paulo Jr. two reasons why these two numbers are usually different and provide an example for each difference?

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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