CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

Warner Corporation reported net income in excess of its net cash flow from operations. A possible explanation of this difference is ______.
A. depreciation expenses
B. non-operating gains
C. a decrease in accounts receivable over the period

User Contributed Comments 11

User Comment
mm04 Why is decrease in accounts receivable wrong?
nchilds There is no reason it couldn''t be the correct answer, however, B is the better of the two.
EBIII read the question: excess of net cash flow from operations: decrease in accounts receivable can NOT be correct as A/R are already taken into account !
aliminhas Just to add on EBIII comment, decrease in A/R results in increased operating cashflows!!
yizhang It is wrong, decrease AR will increase cash flow.
question ::net income >cash flow
sarath If the AR is decreased this means increase in hte cash flows...
CoffeeGirl decrease in A/R.
A/R counted into revenue, no impact on revenue.

decrease in A/R meaning cash inflow, so CFO rises.
thus, net income < CFO
ehc0791 A will make difference between income and cf, but it reduced income
rufi in indirect method gains ara substracted form NI, which makes CF smaller
octavianus Nonoperating gains are added to net income from continuing operations, equaling net income.

Nonoperating gains are subtracted from net income, leaving CFO less than net income.
Profache Non operating gains are added in the income statement to compute net income, but since they are not a source of cash of operating activities, they are not included in the computation of cash flow from operations. In this case,
NetIncome > Cash Flow from Operations.
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