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Author Question: Why is an understanding of cash flow so important in the study of finance? What will be an ideal ... (Read 64 times)

drink

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on: Jul 10, 2018
Why is an understanding of cash flow so important in the study of finance?
 
  What will be an ideal response?

Question 2

Which of the following identities is FALSE?
 
  A) Cash Flow to Creditors = Interest Expense - Net New Borrowing from Creditors
  B) Net New Borrowing = Ending Long-term Liabilities - Beginning Long-Term Liabilities
  C) Cash Flow to Owners = Dividends + Net New Borrowing from Owners
  D) Net New Borrowing from Owners = Change in Equity


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trog

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: A firm may show robust accounting profits, yet still get into serious financial trouble or even go bankrupt. It is only cash flow that allows accurate and insightful financial analysis, which is the foundation of a firm's long-run planning and value maximization.

Answer to Question 2

Answer: C
Explanation: C) Cash Flow to Owners = Dividends - Net New Borrowing from Owners


drink

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Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)

mohan

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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