What is the Net Profit and Cash Flow of Johns Inc. for the Year?

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In summary, net profit, also known as net income, is the amount of revenue left over after deducting all expenses, taxes, and interest from a company's total revenue. It is a measure of a company's profitability and is usually reported on the income statement. Net profit is calculated by subtracting the total expenses from the total revenue of a company. On the other hand, cash flow is the amount of money that is coming in and going out of a company, and it is a measure of a company's liquidity and its ability to pay its debts and expenses. It takes into account the actual cash that is coming in and going out, providing a more accurate picture of a company's financial health compared to net profit, which only considers
  • #1
karush
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1. Johns Inc.has just ended the calendar year making a sale in the amount of \$10,000
of merchandise purchased during the year at a total cost of \$7,000.
Although the firm paid in full the merchandise during the year.
it has yet to collect at year end from the customer.
The net profit and cash flow from this sale for the year are.
A. \$3000 and \$10,000 respectively
B. \$3000 and -\$7,000 respectively
C. \$7,000 and -\$3,000 respectively
D. \$3000 and \$7,000 respectively

I choose B but not sure how cash flow is mesnt here
 
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  • #2
B is correct.
Why are you not sure?
 
  • #3
the textbook was 😰
 

FAQ: What is the Net Profit and Cash Flow of Johns Inc. for the Year?

What is net profit?

Net profit, also known as net income, is the amount of revenue left over after deducting all expenses, taxes, and interest from a company's total revenue. It is a measure of a company's profitability and is usually reported on the income statement.

How is net profit calculated?

Net profit is calculated by subtracting the total expenses (such as cost of goods sold, operating expenses, and taxes) from the total revenue of a company. The formula for net profit is: Net Profit = Total Revenue - Total Expenses.

What is cash flow?

Cash flow is the amount of money that is coming in and going out of a company. It is a measure of a company's liquidity and its ability to pay its debts and expenses. There are two types of cash flow: operating cash flow and investing cash flow.

How does cash flow differ from net profit?

Cash flow is different from net profit in that it takes into account the actual cash that is coming in and going out of a company, whereas net profit only considers the revenues and expenses that are recorded on an income statement. Cash flow provides a more accurate picture of a company's financial health.

Why is it important to analyze both net profit and cash flow?

Analyzing both net profit and cash flow is important because they provide different insights into a company's financial performance. Net profit shows the profitability of a company, while cash flow shows its ability to generate and manage cash. Both are important in evaluating the financial stability and success of a company.

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