Question 1

Josh and Amy are finance trainees at a company which has been reporting a positive cash flow for the last 5 years. Both Josh and Amy have learned in their finance courses at the university that cash is king and is more important than reported profits by a company. Guided by this knowledge, none of them feels a need to review the companys cash flow pattern over time. Are they necessarily correct in their understanding about a firms long-term cash flow situation?

Discuss briefly in no more than 100 words