Why can it be misleading to use a firm's working capital to discuss cash flow without further qualification

Q: How do transaction costs and asymmetric information hinder the growth of financial markets?

A: Transaction cost : transaction cost are expense incurred when buying or selling goods or services.…

Q: Why should the managers make investment decisions on the basis of cashflows rather than profits?

A: Net income: The bottom line of an income statement which is the result of excess earnings from…

Q: a. What is meant by a company's cost of capital? b. Why is the company's cost of capital critical…

A: Company needs fund to purchase the assets and for operations. Companies finance with Debt and…

Q: novation cau

A: Financial markets exhibit asymmetric information in any transaction in which one of the two parties…

Q: How can the components of working capital affect the cash position of a firm?

A: The question is based on the concept of working capital and effect of change in working capital on…

Q: Why might the riskiness of cash flow from the residual value of the real estate differ from the…

A: It is nothing but the salvage value or scrap value of an asset. It speaks to the measure of…

Q: fers from Free Cash Flows (FCF) and discuss the types of businesses for which this differences will…

A: Difference between EBITDA and free cash flow : Analysts utilise a variety of measures to assess a…

Q: How is working capital handled in the calculation of cash flows from a capital investment? Is it…

A: Working capital or net working capital is equals to firm’s current assets minus current liabilities,…

Q: How can changes in working capital affect a company's cash flows, and how can this be managed…

A: Working capital is a financial metric that represents the amount of money a company has available to…

Q: Does it ever make sense for a profitable company with positive cash flow to seek external financing?…

A: External financing is any kind of business funding you acquire from sources outside the company.…

Q: Explain "frce cash flows. Why do managers like to retain free cash flows instead of distributing it…

A: Free cash flows : As the name suggests, free cash flows relates to the fund that are leftover to a…

Q: What factors are frequently ignored in financial analysis? Why?

A: Qualitative factors are the factors that deal with an intangible as well as inexact information that…

Q: Why are the cash flows so difficult to estimate accurately?

A: Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and…

Q: Is cash flow more reliable than accounting profit? Which one is more useful?

A: Cash Flow Cash flow system records the cash inflow and cash outflow to determine company's…

Q: why do firms use non financial measures

A:

Q: In what ways the operating, investing and financing cash flows of a growing firm might be different…

A: Cash flow statement has three sections operating activities, investing activities, and the financing…

Q: Name some factors that are generally beyond the firm’s control butstill affect its cost of capital

A: The cost of capital is the cost of source of funds that are used to buy the assets.

Q: How does the firm’s internal condition affect its actual capital structure?

A: The capital structure is the structure of mix of debt and equity which shows how a company has…

Q: Which of the following is not a function of Financial Manager a. Investment Decision b. Planning…

A: Three major functions of financial managers are:  Investment decisions Financing decisions Dividend…

Q: What, if any, would be the advantage of using a non-articulated approach to financial

A: Answer:-  Articulation:- In order to make the net incomes equal to variation in equity of owner for…

Q: Which of the following is a drawback of payback period method of investment appraisal? O it is cash…

A: Pay-back period:- It is the length of time required to recover the cost of the cash outflow. It is…

Q: Can a firm have income without also having a positive cash flow? Explain.

A: Cash Flows are the inflows & outflows of cash in the business to meet the day to day activities.…

Q: Why is the indirect method of cash flow confusing and why is it helpful?

A: Cash Flow Statement - Under Cash Flow there are three type activities involved - 1. Operating…