Question
A firm has increasing profits but declining cash flows.
The management claims business is doing well. What should an analyst examine to validate the claim?Solution
High profits with falling operating cash flow may indicate aggressive revenue recognition, excessive working capital blockage, or manipulation. Analysts rely on CFO to assess real liquidity.
Statements:
All fruits are nuts
All nuts are vegetables  Â
Conclusion:
I. Some vegetables are nuts
II. Some ve...
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