Answered: Why are income statements and cash flow…

Why are income statements and cash flow statements both valuable to investors? Analyze the income statement's and cash flow statement's information content in relation to one another.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Why are income statements and cash flow statements both valuable to investors? Analyze the income statement's and cash flow statement's information content in relation to one another.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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