Why free cash flow is more important than net income

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Reference no: EM132065837

Financial statements are based on generally accepted accounting principles (GAAP) and are audited by CPA firms. Referencing textbook readings, lecture material, and current business resources please explain if investors need to worry about the validity of those statements. Please explain which financial statement is the most critical for financial analysts to review and why?

Also, some firms have free cash flow, whereas other firms do not have free cash flow. Please define and explain what free cash flow is. Provide an example of a company that has free cash flow and another company that does not have free cash flow. For an investor’s perspective, explain why free cash flow is more important than net income.

Reference no: EM132065837

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