Why is the statement of cash flows useful to the analyst?
A) It is the only source in financial statements for learning about cash generation.
B) Focusing on net income can be misleading if a company has a healthy profit, but cannot translate the profit into cash.
C) The statement of cash flows reveals why a company was able to generate a profit.
D) Both (a) and (b).

Question

Quizplus · Accepted Answer

The statement of cash flows is important for analysts because it provides information about a company's cash generation and can reveal why a company may not be able to translate a healthy profit into cash. Therefore, both options (a) and (b) are correct. The statement of cash flows does not necessarily reveal why a company was able to generate a profit, so option (c) is not a valid choice.

Why Is the Statement of Cash Flows Useful to the Analyst