PWRPT C13 Cash Flow

PWRPT C13 Cash Flow - Accrual Accounting An Attempt to...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
4/1/10 Accrual Accounting An Attempt to Capture Economic Substance Example : A firm buys a high-speed copy machine for $30,000. The machine is expected to last 3 years. Because of the machine, annual copy costs will decrease by $15,000 (e.g., less money to Kinko’s). Cash-basis accounting (net cash flows in ‘000s): -15, +15, +15 Accrual-basis accounting (net income
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4/1/10 Accrual Accounting Gets Mixed Reviews “The one thing to watch is cash flow. You can only fake cash flow if you are willing to risk going to jail. Earnings are a less accurate indicator. It takes very little to change an earnings picture completely.” An average, Drucker is incorrect (empirically, earnings are a more accurate indicator of future performance compared to cash flows); however, learning how to jointly consider earnings and cash flow is critical
Background image of page 2
4/1/10 Predictive Value? Cash-basis accounting: -15, +15, +15 Accrual-basis accounting: +5, +5, +5
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4/1/10 The Accrual Connection Balance Sheet (#1) Balance Sheet (#2) Income Statement
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 11

PWRPT C13 Cash Flow - Accrual Accounting An Attempt to...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online