Question

New World Aviation's financial statements show that its net income increased significantly compared to the prior year, but net cash flow from operations declined.


New World Aviation's financial statements show that its net income increased significantly compared to the prior year, but net cash flow from operations declined. What might explain this result? 

  • Operating income declined 

  • Cost of goods sold increased 

  • Interest expense increased 

  • Depreciation expense declined significantly 

  • Expenditures on fixed assets declined

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Answer #1

option D: Since depreciation is added back to calculate operating cashflows, if it reduce significantly the cashflow can decrease compared to previous year

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