Some Analysts Focus Attention on Cash Flow from Operations, Thinking

question 70

Essay

Some analysts focus attention on cash flow from operations, thinking it as important as, or more important than, net income as a performance measure.Interpreting cash from operations as a measure of operating performance requires considering cash flows along two dimensions: (1) their timing and (2) their classification and disclosure in the statement and related notes.Explain.

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Definitions:

Supplies Account

An account used in accounting to track the cost of supplies spent over a specific period.

Accumulated Depreciation

The cumulative depreciation expense charged on a fixed asset throughout its useful life.

Contra-Liability

A liability account that is used to reduce the value of a related liability, not commonly used in accounting terminology.