In comparing accounting net income and operating cash flow, name two items you typically find in net income that are not in operating cash flow. Explain what each is and why it is excluded in operating cash flow.
Answer to relevant QuestionsUnder standard accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs, the owners’ equity is negative. Can this happen with market values? Why or why not? Referring back to the Merrill Lynch example used at the beginning of the chapter, note that we suggested that Merrill Lynch’s stockholders probably didn’t suffer as a result of the reported loss. What do you think was ...Market Values and Book Values Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $7 million. The machinery can be sold to the Romulans today for $3.7 million. Klingon’s current balance sheet shows ...Calculating Total Cash Flows Given the information for Maria’s Tennis Shop, Inc., in Problems 11 and 12, suppose you also know that the firm’s net capital spending for 2007 was $760,000, and that the firm reduced its net ...Calculating Cash Flows Consider the following abbreviated financial statements for Parrot headEnterprises:a. What is owners’ equity for 2006 and 2007?b. What is the change in net working capital for 2007?c. In 2007, Parrot ...
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