--%>

Is net income of a year is doubtful for company

Is the net income of a year money the company made that given year or is this a number whose importance is quite doubtful?

E

Expert

Verified

The net income of a year is not money which accumulates in the safe. Thus, it is not “money” the company earned. Conversely, it is one of the possible numbers (along with the flexibility which accountancy gives) a company might have illustrated. Fernández (2004a and 2004b) states that, usually, cash flow is more helpful than net income: reported net income can be presented in some ways (this is just an opinion) whereas equity cash flow or free cash flow is a truth: a unique number. There is a financial maxim that, although this is not completely true, might be convenient to keep in mind: “net income is only an opinion, whereas cash flow is a fact.”

   Related Questions in Corporate Finance

  • Q : What are Workpapers Workpapers : In

    Workpapers: In finance world, work papers are documents which are created during the procedure of computing the financial records of a business or individual. The accounting professional which is tasked with examining the book-keeping of a business mi

  • Q : Determining Profitable purchasing ABC

    ABC Corporation is interested in purchasing a machine which will cost $50,000, and it will depreciate it on the straight-line basis over a 5-year period. The machine is predicted to last for 7 years and then Milan will sell it for $5,000. The expected earnings before

  • Q : Explain lognormal random walk based on

    Explain lognormal random walk based on Brownian motion.

  • Q : Explain the definition of WACC An

    An investment bank computed my WACC. The report is as: “the definition of the WACC is defined as WACC = RF + βu (RM – RF); here RF being the risk-free rate and βu the unleveraged beta and RM the market risk rate.” It is differ from what we

  • Q : Is it correct to use valuation of

    Is this correct to use in the valuation of the shares of a certain company the “the real net assets value” which, as per to the Institute of Accounting and Auditing (ICAC), shows the “book value of shareholder’s equity, corrected through increa

  • Q : Illustrates cost of its equity is zero

    Is this true that the cost of its equity is zero, if a company does not distribute dividends?

  • Q : Calculate their after tax cost of debt

    Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of whichrequire semiannual interest payments. Bond A has a coupon rate of 4.0%; a price qu

  • Q : Explain few Spanish mutual funds

    Is this true that very little Spanish mutual funds outperform their benchmark? Isn’t this strange?

  • Q : What is the current example of a value

    What is the current example of a value company and would you buy it as an investment. Why or why not?

  • Q : What are flow variables Flow variables

    Flow variables: Any variable, whose magnitude is evaluated over a time period, is termed as glow variable.