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

Question

Quizplus · Accepted Answer

Cash flows provide a more accurate measure of a company's liquidity and ability to generate cash, while accounting earnings are subject to various accounting rules and may not reflect the actual cash generated by the business. However, reported accounting earnings are still important for understanding a company's profitability and financial performance.

Managers Often Focus on Cash Flows, but Reported Accounting Earnings