Financial Accounting Blog

Monday, November 24, 2003

The power of cash flow ratios talks about how important it is to analyze the cash flow statement. He states that many auditors use the income statement and balance sheet and ratios that apply to those financial statments instead of the cash flow statement. Balance sheet data measures a single point in time whereas the cashflow statement focuses on what shareholders really care about:cash available for operations and investments. The author believes that for liquidity analysis, cash flow information is more reliable.