--%>

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 Stock exchanges Stock

    Stock exchanges: A stock exchange provides services useful for trading, issue and redemption of shares and other securities for traders and brokers. They will also provide facility for payment of income and dividends for listed securities. Securities

  • Q : How can industrial company inflate

    How can any industrial company inflate the value of its inventory so as to decrease net income and the taxes is has to pay in a year?

  • Q : Which method must use to valuate young

    Which method must we use to valuate young companies along with high growth but uncertain futures? Two illustrations were Boston Chicken and Telepizza while they began.

  • Q : Why do a Split Why do a Split?

    Why do a Split?

  • Q : Mm ase Study 1 You work in Walt Disney

    ase Study 1 You work in Walt Disney Company's corporate finance and treasury department and have just been assigned to the team estimating later today. You quickly realize that the information you need is readily available online. 1) Go to http://finance.yahoo.com. under " Market Summary," you will

  • Q : Expected return and standard deviation

    If an investor is considered to be risk-averse, what is his/her attitude towards expected return and standard deviation?

  • Q : Continuously compounded rate of return

    Solve for the stated annual rate, r equal to the continuously compounded rate of return implicit in turning $1 at the end of 1925 (beginning of 1926) into these reported valued from RWJ9 in 2008 Figure below: 1. Determine the state

  • Q : Does the equity of shareholders have

    Does the equity of shareholders represents the savings a company has accumulated by the years?

  • Q : What is the sales of the firm The

    The financial ratios of a firm are as follows. Current ratio = 1.33 Acid-test ratio = 0.80 Current liabilities = 40,000 Inventory turnover ratio = 6  What is the sales of the firm?

  • Q : PV of Dividends PV of dividends:

    PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?