ACC-1A Lecture Notes - Lecture 8: Cash Flow Statement, Cash Flow, Discount Window
Document Summary
Cash flows are less susceptible to manipulation that accrual accounting. The amount of cash is a relative easy number to audit. However, management may be strategic in choosing what section a cashflow is reported. Cutting price at the end of the period to accelerate sales from next period to this period. When you analyzing a company"s income statement yo don"t know much of the bottom line net income is a result of accruals or cash transactions. Cash components is more persistent that accrual component. How much is today worth next year if you can earn a 5% interest on it. You can rearrange formula: pv = fv / (1+r)^n. Present value should always be less than fv. The present value in an amount if always lower than the amount itself. Net present value (npv) of a series of fvs.
