Answered: Why might smaller companies prefer to…

Why might smaller companies prefer to use techniques such as cash payback and accounting rate of return over discounted cash flow techniques?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Why might smaller companies prefer to use techniques such as cash payback and accounting rate of return over discounted cash flow techniques?

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Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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