I have been teaching undergraduate “Accounting Theory” for the past three years. For reasons that I will explain below, I choose to begin the course by exploring differences between accrual accounting and cash flows; and relatedly, how to analyze a statement of cash flows.
First, you need to know that I love my students. They are diligent, highly teachable, respectful and ambitious. They even laugh at some of my jokes. I could say more about them, like how I think that merely being in their presence at my advanced age helps to keep me feeling young. But what I have already told you is more than enough to convey my initial shock that — even as last semester seniors on the cusp of internships with Big Four firms — hardly anyone knew very much at all about cash flow statement preparation, much less its analysis.
I know that I will be criticized for saying this, but [Read More...]