1. The chapter demonstrates how to prepare a statement of cash flows from information on the balance sheet and income statement. If this is possible, why are managers required to provide a statement of cash flows? What does the statement of cash flow tell you that the income statement and balance sheet do not?

2. Common-size analysis is a simple way to make financial statements of different firms comparable. What are possible shortcomings of comparing two different firms using common-size analysis?

3. Analysts can compare ROCEs across companies but should not compare basic EPSs despite the fact that both ratios use net income to the common shareholders in the numerator. Explain.