Users of Financial Statements Are Interested in the Ability of a Firm

question 37

Essay

Users of financial statements are interested in the ability of a firm to generate favorable cash flows.This is one reason why the FASB has required the inclusion of a statement of cash flows in the primary financial statements of an enterprise.A cash flow of major interest to investors is the dividends an enterprise has paid in the past and will pay in the future.Investors are particularly interested in the prediction of future dividends.The prediction of the cash flows associated with dividends requires,however,that investors have information regarding other cash flows of the enterprise.
Identify cash flows of an enterprise the knowledge of which would be useful to users of the financial statement in the prediction of future dividends.

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Definitions:

Displaced

Refers to individuals or populations forced to leave their usual residence due to environmental changes, conflict, or other disruptions.

Overuse

Utilizing a resource to such an extent that it leads to its significant depletion or damage.

Groundwater

Water held underground in the soil or in pores and crevices in rock, which is an important source of drinking water.

Subsidence

The gradual caving in or sinking of an area of land.