Explain why accounting profits and cash flows, Financial Management

Assignment Help:

Explain why accounting profits and cash flows are not the same thing.

Stock worth depends on future cash flows, their riskiness and their timing.  Profit calculations don't consider these three factors.  Profit as described in accounting, is simply the difference between sales expenses and revenue.  It is true that much profits are generally better than fewer profits, but when the chase of short-term profits adversely affects the size of future cash flows, their riskiness or their timing and then these profit maximization efforts are detrimental to the firm.

 


Related Discussions:- Explain why accounting profits and cash flows

Stable money measurement, Stable Money Measurement A business entity e...

Stable Money Measurement A business entity enters within numerous transactions in which affect the business in varied ways.  Therefore recording, classification and summarizat

Leverage, what is financial leverage

what is financial leverage

Agency debentures, These debentures are backed by integrity and credi...

These debentures are backed by integrity and creditworthiness. They do not have any specific collateral backing. Therefore, the ability of the issuing GSE to gene

Agency relationships, explain the relationship between shareholders and cre...

explain the relationship between shareholders and creditors

Explain the fixed and floating rates, Question 1 Globalization is a pro...

Question 1 Globalization is a process of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other aspe

Criticism of wealth maximization, Q. Criticism of Wealth Maximization? ...

Q. Criticism of Wealth Maximization? i) The objective of wealth maximization is not, necessarily, socially desirable. ii) There is some controversy whether the objective of

Financial Analysis Management, I need this in the next 24 hours urgently. I...

I need this in the next 24 hours urgently. If you can accept this, you must be meeting the deadline with strictly no delays or full payment refund is needed

Risk and advantages associated with company locations, What are some of the...

What are some of the primary advantages when a corporation has operations in countries other than its home country?  What are some of the risks? Foreign operations may decrease

''a'' priori probability, 'A' Priori Probability This is a probability ...

'A' Priori Probability This is a probability computed by rationally examining existing information. A priori probability can most simply be explained as making a conclusion on

Accrued interest, When an investor buys a bond in between coupon paym...

When an investor buys a bond in between coupon payments, he is supposed to compensate the seller with the coupon interest earned on the bond from the last coupon

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd