Question #1
Reading: Reading 12 Evaluating Quality of Financial Reports
PDF File: Reading 12 Evaluating Quality of Financial Reports.pdf
Page: 1
Status: Correct
Correct Answer: B
Question
Which of the following is least likely an indicator of high-quality cash flow?
Answer Choices:
A. OCF derived from sustainable sources
B. Total cash flow that is positive and high
C. OCF adequate to cover capital expenditures, dividends and debt repayments
Explanation
High-quality cash flow focuses on positive, adequate and sustainable operating cash flow.
Firms with high borrowings could have high total cash flow but such cash flows would not
be sustainable (nor considered high-quality).