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Cash Flow versus Accounting Profit
Of the three major financial statements, the Income
Statement, Balance Sheet and Cash Flow Statement; it is a generally accepted
axiom that Cash flow Statement- with its cash flows – is the most significant
financial factor in finance. In fact,
the core financial valuation principle actually states that the value of a
company today is the present value of its expected future cash flows.
Given the above information and your review of the week 1
material, answer each of the following three questions in a short concise
paragraph:
1. Explain in your own words why the cash flow takes
precedence over the Income Statement and Balance sheet as the primary
measurement tool in financial management and analysis.
2. If cash flow is so important why do we not submit all
financial reports on a cash flow basis and avoid preparing the income statement
and or the balance sheet.
3. What is the specific value to financial management of the
income statement and thee balance sheet?
You are expected to make your own contribution in a main
topic as well as respond with value added comments to at least two of your
classmates as well as to your instructor.
