Why Cash flows are
better than profits
The profit can be manipulated by
the management by accounting policies. For example management can change the
rate of depreciation for the year and this will change accounting profit for
the year similarly management may also be changed by impairment of assets.
Therefore accounting profit is subject to accounting policies and management
valuation. Cash flow is other hand is very straight forward calculation and
cannot be manipulated by accounting policies and management estimates.
