Adjustments to Net Income
Adjustments to net income are non-cash transactions that appear on the balance sheet and income statement that must be factored in when determining a company's cash flow from operations.
When measuring the cash flow in and out of a business, operating cash flow reflects how much cash is generated from a company's products and services. This includes accounts receivable, depreciation & amortization expense, inventory, and accounts payable. However, not all of these transactions involve actual cash items, and these non-cash expenses or revenues must be calculated into a company's net income as well as into its total assets and total liabilities. Depreciation, for exampl
Two scenarios requiring an adjustment to net income: