One of the reasons why cash flow analysis is popular is because:
A)cash flows are more subjective than net income.
B)deferred taxes require future cash payment.
C)cash flows are strictly defined by Generally Accepted Accounting Principles (GAAP).
D)it is difficult to manipulate,or spin the cash flows.
E)operating cash flows are found on the income statement.

Question

Quizplus · Accepted Answer

Cash flow analysis is popular because it is difficult to manipulate or spin the cash flows. Unlike net income, which can be affected by various accounting methods and estimates, cash flow provides a more objective and accurate picture of the company's financial performance. Additionally, deferred taxes may not require future cash payment, and operating cash flows are typically found on the statement of cash flows, not the income statement. While GAAP does define how cash flows should be classified and reported, this is not the main reason for the popularity of cash flow analysis.

One of the Reasons Why Cash Flow Analysis Is Popular