Comment on the difference between net cash provided by operating activities and net income. 

Statement of Cash Flows: Elements

Net cash provided by operating activities and net income are both useful measurements of a company’s financial performance, but they represent different aspects of the business. The net income of a company is determined by subtracting the total revenue from all costs. However, to calculate net cash provided for operating activities you must include non-cash expenses such as amortization and depreciation. Net income measures a business’s profitability over time, while net cash from operating activities is a measure of actual cash flow in and out.

The net income of a business can be a valuable indicator as to how the company is performing. However, this does not reflect its true financial state because it doesn’t take into consideration any investments or short-term debts that may have occurred during that period. The net cash generated by the operating activities gives a true picture of where money is actually going. It can also be helpful in determining how funds are allocated.

Ultimately, both metrics can be used to effectively evaluate a company’s financial performance but it is important to understand their individual purposes so that one can gain more comprehensive insights into their respective operations.