Sample Essay

The cash flows of a company provide a clearer picture of a company’s performance as earnings of a company can be manipulated whereas the cash flows are a true reflection of the cash receipt and cash payment in a company.

This entails that the cash flow per share value would be more reliable for shareholders and investors to make decisions but FASB rules out the presentation of cash flow per share in the financial statements as it would be misleading and confusing for the shareholders to base decisions on both earning per share and cash flow per share. This proscription is useful in one way and disadvantageous in another as it would eliminate any confusion arising out of the use of both earning per share and cash flow per share while on the other hand shareholders would be deprived of a true reflection of the company’s performance based on the cash flows per share basis.

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