Which of the following is NOT true about net operating cash flow?

• A. Net operating cash flow excludes cash flows from investing and financing activities.
• B. Net operating cash flow is the same as net sales reported on the income statement.
• C. Net operating cash flow is calculated by adjusting net income for non-cash items and changes in working capital.
• D. Net operating cash flow provides insight into a company's ability to generate cash from its core business operations.

Answer: (B)

Verified step by step guidance

1. Understand the concept of net operating cash flow: Net operating cash flow refers to the cash generated or used by a company's core business operations, excluding cash flows from investing and financing activities.
2. Review the components of net operating cash flow: It is calculated by adjusting net income for non-cash items (e.g., depreciation, amortization) and changes in working capital (e.g., accounts receivable, inventory, accounts payable).
3. Analyze the statement 'Net operating cash flow is the same as net sales reported on the income statement': This is incorrect because net operating cash flow is derived from net income, not net sales, and involves adjustments for non-cash items and working capital changes.
4. Compare the other statements: The other statements correctly describe net operating cash flow, such as its exclusion of investing and financing activities and its role in providing insight into a company's ability to generate cash from operations.
5. Conclude that the incorrect statement is 'Net operating cash flow is the same as net sales reported on the income statement,' as net sales and net operating cash flow are distinct concepts.