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Question 2 (20%) Consider a firm that needs to record the following transactions in the fiscal year 2020. 1 FY2019 FY2020 -2500 -2500 +4900
Question 2 (20%) Consider a firm that needs to record the following transactions in the fiscal year 2020. 1 FY2019 FY2020 -2500 -2500 +4900 +4900 P PCR S PCU -1000 -1000 +3050 +3050 2 P PCR S PCU 3 -X -X +2200 +2200 P PCR S PCU -1500 -1500 +2800 +2800 4 P PCR S PCU 5 6 7 -900 -900 +1600 +1600 FY2021 P PCR S PCU -2000 -2000 +3300 +3300 P PCR S PCU -2000 -2000 +3700 +3700 P PCR S PCU P = Purchase, PCR = Payment to creditor, S= Sales, PCU= Payment from customers For now, assume that X = 1200. a. What were the (accrual-based) earnings for 2020? b. What was the cash flow generated in 2020? c. Calculate a traditional (indirect) cash flow statement for 2020 based on the seven transactions. d. Assume now that X = 700. Does your answer above change for a), b), and c). If not, why? If yes, show how it changes e. What are the most used critiques against using cash-flow-based performance measures? What about accrual-based performance measures? See next page for Q3
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