(7.3) One of the reasons net income is not the same as cash flow from operations is that sotne deductions are short run, rent is an example of a -deductions; the most common of these is sIn the cost. (7.4) The statement of cash flows organizes sources and uses of cash into three categone and dneciyactivities. Depreciation reduces the firm's tax liability; it appears as a dividends paid are a of eash, while of cash. (7.5) Transactions that create cash inflows are referred to as transactions which create cash outflows are asset account represents a of cash, and of cash. An increase in an of cash. A decrease in a liability or equity _ of cash, while an increase in a liability or equity account is a of cash. account is a n., (7.6) The DuPont identity expresses ROE as a function of Asst.eretitand-finirallese- (7.7) Basic policy elements that must be established by management to develop a financial plan hea are: 1 The firm's needed investment in new assets. 2. The degree of financial leverage the firm elects to employ 3. The dividend payment to stockholders. 4 The firm's liquidity and working capital requirements. decisions, -policy, These four areas represent the firm's decisions. policy, and