Develop brief answers to each of the following questions:

1. Why does a decrease in receivable turnover create the need for cash from operating activities?

2. Why would ratios that include one balance sheet account and one income statement account, such as receivable turnover or return on assets, be questionable if they came from quarterly or other interim financial reports?

3. Can you suggest a limitation of free cash flow in comparing one company to another?

Issues in Financial Performance Evaluation: Objectives, Standards, Sources of Information, and Executive Compensation