Preparing the statement of cash flows

1. Explain what is meant when it is stated that a company has a quick ratio of 1.75.

2. What do activity ratios measure?

3. What is meant by profitability analysis?

4. What is the difference between return on assets and asset turnover?

Companies argue that the direct method of preparing the statement of cash flows is too burdensome; however, given computer technology, that argument doesn’t seem as valid today as it once did.

Do you believe that companies should be required to prepare the statement of cash flows using the direct method? Why? Be sure to consider all the stakeholders involved.

 

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