Asked by Colin Stubblefield on Jul 01, 2024
Verified
Which statement about the income statement is true?
A) The focal point of the income statement is the cash account, because that account cannot be manipulated by "accounting tricks."
B) EBITDA is a truer measure of financial strength than are net income and free cash flow.
C) If a firm follows the International Financial Reporting Standard (IFRS) , its reported net income and net cash flow will be the same.
D) The income statement for a given year is designed to give us an idea of how much the firm earned during that year.
EBITDA
Earnings before interest, taxes, depreciation, and amortization.
Financial Strength
A measure of a company’s ability to meet its financial commitments, indicating its overall financial stability.
International Financial Reporting Standard
A set of accounting standards developed by the International Accounting Standards Board (IASB) that is used globally to prepare public company financial statements.
- Understand fundamental financial reports and their elements for analyzing businesses.
Verified Answer
PK
Paras Khinda7 days ago
Final Answer :
D
Explanation :
The income statement is designed to show how much a firm earned during a given period of time, typically a year. It includes revenue, expenses, and net income, which indicates the profit or loss for the year. Option A is incorrect because the cash account may be affected by accounting adjustments such as accruals. Option B is incorrect because EBITDA is not a recognized accounting standard and may be manipulated. Option C is incorrect because under IFRS, net income and net cash flow are not the same and may differ due to non-cash transactions.
Learning Objectives
- Understand fundamental financial reports and their elements for analyzing businesses.