In finance, we separate operating decisions from financing decisions and thus exclude ________ as a part of operating income from the income statement.
A) cash flow
B) dividends
C) interest expense
D) earnings
Question 2
Which of the following statements is true?
A) The finance manager uses the framework of the income statement to find the operating income of the company (an accounting measure), which is also the true cash flow from operations.
B) In accrual-based accounting, revenue is recorded at the time of sale if the revenue has been received in cash.
C) Three fundamental issues separate net income and cash flow: accrual-based accounting, noncash expense items, and interest expense.
D) Generally accepted accounting principles (GAAP) in the United States do not allow the use of accrual-based accounting to record revenue.
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