Posted: September 21st, 2016

if investors are truly interested in knowing a company’s future cash flows, why would they care about current earnings?

.if investors are truly interested in knowing a company’s future cash flows, why would they care about current earnings?
a. net income provides an estimate of sustainable “annualized” future stock
b. accruals and deferrals imitate the “lumpiness” inherent in year-to-year cash flows
c. Investors are better able to predict a company’s future free cash flows using accrual earnings.
d. Current earnings show a best estimate of cash balance that firm holds at the end of year.