Final answer:
Current cash flows may be a more practical indicator of a company's potential for future operations due to its direct relation to a company's ability to reinvest and sustain operations, despite net income also being a useful measure of profitability.
Step-by-step explanation:
When considering whether net income or current cash flows is a better predictor for future operations, it's important to understand the roles that both play in a company's financial health and prospects. Net income provides a measure of profitability including all revenue and expenses over a period, affected by non-cash items like depreciation. On the other hand, current cash flows give a snapshot of the cash entering and leaving a company, offering a concise view of its ability to generate cash and fund operations such as reinvesting in equipment and technology, thus supporting growth.
Considering the implications on stock prices, expectations of future performance can also pivot on analysts' predictions, which may not always align with current profitability or cash flows. Moreover, cash flows are critical for a company to sustain and grow, especially when profits are low or during tough times when strong financial capital sources are necessary for survival. Hence, while both metrics are valuable, current cash flows may often be a more practical indicator of a company's ability to reinvest, maintain operations, and navigate financial challenges, thereby serving as a better predictor for future operations.