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.