[amp_mcq option1=”cash flow” option2=”accounting income” option3=”earnings” option4=”operating profit” correct=”option1″]<\/p>\n
The correct answer is A. cash flow.<\/p>\n
Capital budgeting is the process of planning and evaluating long-term investments. The goal of capital budgeting is to make decisions that will maximize the value of the firm.<\/p>\n
One of the most important concepts in capital budgeting is incremental cash flow. Incremental cash flow is the difference between the cash flows of the firm with the project and the cash flows of the firm without the project.<\/p>\n
Incremental cash flow is the only relevant measure of cash flow in capital budgeting. This is because only incremental cash flow affects the firm’s value.<\/p>\n
Accounting income, earnings, and operating profit are all measures of profitability. However, they are not relevant measures of cash flow in capital budgeting. This is because they do not take into account the timing of cash flows.<\/p>\n
For example, a project may have a large accounting loss in the first year, but a large cash inflow in the second year. This project would be a good investment, even though it has a large accounting loss in the first year.<\/p>\n
Therefore, the correct answer is A. cash flow.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”cash flow” option2=”accounting income” option3=”earnings” option4=”operating profit” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[952],"tags":[],"class_list":["post-44303","post","type-post","status-publish","format-standard","hentry","category-costing","no-featured-image-padding"],"yoast_head":"\n