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Chapter 4: Q2Q (page 179)

How can information based on past transactions be used to predict future cash flows?

Short Answer

Expert verified

Past transactions are useful in predicting important trends. It is also helpful in providing information regarding the future performance of cash flows.

Step by step solution

01

Meaning of Cashflows

Cash flows refer to the movement of cash coming in and out of a company. Receiving cash means cash inflows, and Spent cash means cash outflowsof a company.

02

Evaluation of past performance to predict future cash flows

Past revenues and expenses incurred by a company during itsprevious year of operation can helppredict the performance of the company for the future and can also be useful for comparing the performance of its competitors.

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Identify at least two situations in which important changes in value are not reported in the income statement.

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