[amp_mcq option1=”Cash Flows” option2=”Accounting Profit” option3=”Interest Rate on Borrowings” option4=”Last Dividend Paid” correct=”option1″]<\/p>\n
The correct answer is A. Cash Flows.<\/p>\n
A sound capital budgeting technique is based on cash flows because it is the most accurate way to measure the profitability of an investment. Cash flows are the actual money that comes in and out of a business, and they are not affected by accounting methods or other factors that can distort profits.<\/p>\n
Accounting profit is not a good measure of profitability because it includes non-cash items such as depreciation and amortization. These items do not represent actual cash flows, and they can make accounting profit look higher or lower than it actually is.<\/p>\n
The interest rate on borrowings is also not a good measure of profitability because it is a cost of doing business. It is not directly related to the profitability of a particular investment.<\/p>\n
The last dividend paid is also not a good measure of profitability because it is a historical measure. It does not reflect the future profitability of a business.<\/p>\n
Therefore, the only option that is a good measure of profitability is A. Cash Flows.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Cash Flows” option2=”Accounting Profit” option3=”Interest Rate on Borrowings” option4=”Last Dividend Paid” 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":[945],"tags":[],"class_list":["post-44774","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n