Question: You are taking both an intermediate accounting class and a corporate finance class. Your finance professor has been very critical of the accounting profession and

You are taking both an intermediate accounting class and a corporate finance class. Your finance professor has been very critical of the accounting profession and the never-ending series of accounting scandals reported in the press. During one recent class meeting, your finance professor suggested that all of the accounting scandal problems could be solved if we just eliminate the reporting of earnings and instead focus on operating cash flow. Your finance professor points out that valuation models are based on cash flow, not earnings. In addition, cash flow is not subject to the same manipulations that are used in computing earnings. How would you respond to this suggestion from your finance professor?

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