Use Of Cash Flow Statement For Performance Analysis
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Question
1. For anyone analyzing the performance of an organization, the statement of cash flows is useful because:
- It is the only source in financial statements for learning about how cash is generated.
- A focus on net income can be misleading if a company has a healthy profit, but is not converting profit into cash.
- It reveals why a company was able to generate a profit.
- Both (a) and (b).
2. I. The cash conversion cycle of a firm can be improved by decreasing the days inventory held and days payable outstanding, while decreasing the average collection period.
II. The DuPont System helps the analyst see how a firm’s decisions and activities over an accounting period interact to produce an overall return to the firm’s shareholders,, the return on equity.
- Only Statement I is true.
- Only Statement II is true.
- Both Statements I and II are true.
- Both Statements I and II are false.
Summary
The multiple questions belong to Finance. The 1st question discusses about the analysis of cash flow statement of a firm and the 2nd question is about whether or not two statements are true or false.
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