Use Of Cash Flow Statement For Performance Analysis


1. For anyone analyzing the performance of an organization, the statement of cash flows is useful because:

  1. It is the only source in financial statements for learning about how cash is generated.
  2. A focus on net income can be misleading if a company has a healthy profit, but is not converting profit into cash.
  3. It reveals why a company was able to generate a profit.
  4. Both (a) and (b).

2. I. The cash conversion cycle of a firm can be improved by decreasing the days inventory held and days payable outstanding, while decreasing the average collection period.

II. The DuPont System helps the analyst see how a firm’s decisions and activities over an accounting period interact to produce an overall return to the firm’s shareholders,, the return on equity.

  1. Only Statement I is true.
  2. Only Statement II is true.
  3. Both Statements I and II are true.
  4. Both Statements I and II are false.



The multiple questions belong to Finance. The 1st question discusses about the analysis of cash flow statement of a firm and the 2nd question is about whether or not two statements are true or false.

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