Managers often focus on cash flows, but reported accounting earnings are a better indicator of a firm's economic health.

Question

Quizplus · Accepted Answer

While cash flows are important for a company's liquidity and financial health, accounting earnings provide information on the profitability and overall economic health of the company. However, accounting earnings can be manipulated through various accounting methods, so it is important to consider both cash flows and earnings when evaluating a company's performance.

Managers Often Focus on Cash Flows, but Reported Accounting Earnings