Many investors today prefer the cash flow statement over the income statement. They believe that cash-based data are a better measure of performance than accrual-based data because the estimates and judgements that are required for accrual accounting allow management too much discretion to manipulate the results.
Instructions
Write a brief memo explaining whether or not it is harder for management to manipulate income using cash-based data than accrual-based data. In your answer, say which financial statement, in your opinion, is the best measure of a company's performance, and explain why.