In reviewing the financial statements of NanoTech Co., you discover that net income increased while operating cash

Question:

In reviewing the of NanoTech Co., you discover that net income increased while operating cash flows decreased for the most recent two consecutive years.

Required:
a. Explain how net income could increase for NanoTech while its operating cash flows decrease. Your answer should include three illustrative examples.
b. Describe how operating cash flows can serve as one indicator of earnings quality.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...