A describe reasons for investors to assess the quality of cash flow statements; Flashcards Preview

L1 34 Shenanigans on the Cash Flow Statement > A describe reasons for investors to assess the quality of cash flow statements; > Flashcards

Flashcards in A describe reasons for investors to assess the quality of cash flow statements; Deck (1)
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1
Q

Firms can create the perception that sustainable operating CF’s are greater than they actually are

A

Mgmt has discretion over the timing of CF’s, so analysts should investigate the quality of a company’s CF’s and determine whether increases in Op CF are sustainable

Management also has discretion over where to report CF’s so I should be aware that the diff. in treatment among companyes may make comparisons of CF’s less useful ,in particular for valuations.