Question

If cash flow is the most important measure of a company's viability, why do stock prices respond to announcements about accounting earnings and net income?

Answer 1

Cash Flow statement is the showing cash flow of company but it will not shows the revenue of the company. There may be positivecash flows due to amount borrowed or issue of share capital so the cash flow statement is the only shows the cash flow not the revenue of the organization.

Accounting earnings and net income will shows the real revenue of the company and so the stock prices respond only due to announcements about accounting earnings and net income .