wever, that being the rule, "Cash is still King."  This is why we have the Statement of Cash Flows.  The Statement of Cash Flows essentially converts the accrual basis numbers to a cash basis.  Why do you think investors and creditors often focus on the Statement of Cash Flows when making decisions about whether to invest or loan money to

Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter1: Accounting As A Form Of Communication
Section: Chapter Questions
Problem 1.15MCE
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As you have seen from studying  the adjusting process and the accounting cycle chapters, Generally Accepted Accounting Principles (GAAP) require that we account for Revenues when earned and expenses when incurred regardless of when we receive or pay cash.  However, that being the rule, "Cash is still King."  This is why we have the Statement of Cash Flows.  The Statement of Cash Flows essentially converts the accrual basis numbers to a cash basis.  Why do you think investors and creditors often focus on the Statement of Cash Flows when making decisions about whether to invest or loan money to a business?  Why do you think that they look for positive net cash provided by operations?

Remember to answer both questions and state your reasons.

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