In a situation where a company has reduced its depreciation expense and declared a cash dividend, which of the following statements is NOT true regarding its financials?

The correct understanding revolves around the company's actions regarding depreciation expense and the declaration of cash dividends. When a company reduces its depreciation expense, it means that less of its earnings are being allocated to this non-cash expense. This reduction typically results in higher net income, all else being equal, since less expense will elevate profitability on the income statement.

If the company declares a cash dividend, this impact doesn't directly correlate to operating cash flow. Operating cash flow measures cash generated from a company's core business operations, unaffected initially by non-cash expenses like depreciation. Therefore, while the reduction of depreciation means higher reported earnings, it does not lead to a decrease in operating cash flow. In fact, it can suggest an increase due to enhanced profitability.

The increase in retained earnings is a result of higher net income, while cash dividends deducted from available cash do not interfere directly with operating cash flow calculations. Thus, the assertion that operating cash flow would decrease is not aligned with the implications of these financial actions. Therefore, the statement concerning a decrease in operating cash flow is not true given the context provided.