COST ACCOUNTING
CAPITAL BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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cost savings resulting from the investment.
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sum of all future revenues from the investment.
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net increase in cash receipts over cash payments.
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net increase in cash payments over cash receipts.
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Detailed explanation-1: -Net Cash Flow = Total Cash Inflows – Total Cash Outflows Balancing cash inflow and outflow is vital to maintaining a healthy business.
Detailed explanation-2: -Net Cash Flow is the profit (or loss) of the entity plus non-cash expenses (that is depreciation and amortization). Net cash flow includes the financing and investing activities that are included on the income statement, but excludes financing and investing activities affecting the balance sheet.
Detailed explanation-3: -The net cash flow to invested capital represents the amount of cash flow generated by the company prior to consideration of how it may be financed. As shown in the example above, it excludes the impact of changes in debt and is pre-interest expense.
Detailed explanation-4: -Positive cash flow indicates that a company’s liquid assets are increasing, enabling it to cover obligations, reinvest in its business, return money to shareholders, pay expenses, and provide a buffer against future financial challenges.