In accounting, emphasis is placed on determining net income in accordance with generally accepted accounting principles. In finance, the primary emphasis is also on net income because that is what investors use to value the firm. However, a secondary financial consideration is cash flow, because cash is needed to operate the business.

a) true

b) false

Question

Business

Gigi

16 December, 12:54

In accounting, emphasis is placed on determining net income in accordance with generally accepted accounting principles. In finance, the primary emphasis is also on net income because that is what investors use to value the firm. However, a secondary financial consideration is cash flow, because cash is needed to operate the business.

a) true

b) false

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Answers (1)

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Natalia Meyers · Answer 1

Answer: false

Explanation: The first statement in the given case is correct as accounting is based on determining net income. Whereas, the subject matter of finance is related to increase the value of the company and the value of its shareholders wealth.

Finance does not only focus on net income but it also focuses on other aspects like liquidity, future potential etc.

Hence the given statement is false.