1. Why might revenue and cost figures shown on an income statement not be representative of...

1. Why might revenue and cost figures shown on an income statement not be representative of the actual cash inflows and outflows that occurred during the period?

Expert Solution

Actual cash inflows and outflows are not always translating into revenues and the cost statement which has been shown on the income statement as there are other aspect to cash flows rather than just operating activities so there will be various cash flows which are related to investing activities which will be leading to purchase of the fixed assets or sale of the fixed assets and there are also various cash flows which are related to financing decisions like payment of the dividends and and raising of the equity capital of payment of the debt capital so they are not going to be part of income statement because income statement will only be including revenue and cost of those nature which are mostly operating in nature and hence it can be said that all those other expenses will not be reflecting on the revenues and income statement.

Cash flows from investing activities which will include sale and purchase of the fixed asset and cash flow from financing activities which will be including raising of the capital like debt capital and equity capital and payment of the equity capital in form of dividend are not reflected on the income statement of the company and hence it can be said that the income statement of the company will not be including all the cash flow in revenue and cost.

jeff jeffy answered 2 years ago

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