Company Future Cash Flows 549971

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” long-run future free cash flows.

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.