--%>
Assignment Help - homework help

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 : Provide three examples of mutually

    provide three examples of mutually exclusive projects?

    		•
  • Q : Problem on EBIT ABC Corporation stock

    ABC Corporation stock sells at $27 per share and its dividend per share is $1.20. ABC has price-earnings ratio of 16. The company contains $40 million worth of bonds, selling at par, with 8.5% coupon. The EBIT of ABC is of $12 million and its tax rate is 30%. Calculat

    		•
  • Q : Problem on annual obligation payment

    ABC Corp. has a challenge: The CEO wants to set aside annual, end of year payments into a sinking fund account earning 5% over the next 6 years in order to retire $25 million in bonds that will be outstanding at that time. Determine the annual payment required each ye

    		•
  • Q : Explain usual value of the sales of net

    Does the usual value of the sales and of the net income of Spanish companies have anything to do along with sustainable growth?

    		•
  • Q : Explain definition of put–call parity

    Explain the definition of put–call parity described by Reinach.

    		•
  • Q : Attributes of debt securities What are

    What are the Attributes of debt securities?

    		•
  • Q : Explain Cost of capital aspect Cost of

    Cost of capital aspect: Estimation of WCR is beneficial from the point of view of cost of capital too. A sound working capital position is beneficial from the point of view of both owners and lenders of the company. A sufficiently positive position me

    		•
  • Q : Price per share for Corporation For XYZ

    For XYZ Corporation debt-to-equity ratio, marginal tax rate, and dividend payout ratio are all of 40%. The cost of debt is 10%. Cambria contains 1 million shares of common stock, and $25 million in long-term bonds. Its dividend is $1 per share. Determine the EBIT and

    		•
  • Q : Zero Coupon Bonds-Corporate Bonds

    Describe the term Zero Coupon Bonds in Corporate Bonds?

    		•
  • Q : Define Credit and Collections Credit &

    Credit & Collections: Usually, credit is stated as the procedure of providing a loan, in which one party transfers wealth to the other with the expectation that it will be re-paid in full plus interest. The definition of collections is connected t

    		•