It is difficult to measure the business performance of a company in the short run using only cash flow measures because of timing and matching problems. Describe each of these problems and cite at least one example for each.
Answer to relevant QuestionsExplain why cash flow measures of performance are less useful than accrual-based measures.Economic income measures change in value while permanent income is proportional to value itself. Explain this statement.Explain the hierarchy of inputs used in determining fair values. The use of which level of input lowers the reliability of fair value estimates?Would you be willing to pay more or less for a stock, on average, when the accounting information provided to you about the firm is unaudited? Explain.Describe factors that bring about managerial discretion for preparing financial statements.
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