Question

Bill and Jeanne are new managers at Baluga Corporation and are discussing the future prospects of their company. Bill insists the company’s future is fantastic since Baluga has an upward trend in net income. Jeanne, while not disagreeing, adds that the proof of ultimate success is the accumulation of cash, which therefore requires looking beyond net income to cash flows. Bill’s response:” Income and cash flow are the same thing, aren’t they?”

Required
Assume the role of Jeanne and explain why it might be wise to evaluate the future prospects of the company using cash flow information in addition to net income.



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  • CreatedSeptember 23, 2013
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