The reason to focus on cash flow instead of net income in capital budgeting. Introduction: Operating Cash Flow: The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 12, Problem 1Q

Summary Introduction

To explain: The reason to focus on cash flow instead of net income in capital budgeting.

Introduction:

Operating Cash Flow:

The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Expert Solution & Answer

Answer to Problem 1Q

Cash flow is used instead of accounting income because actual cash is required and spent for the projects or expansion plans of a company.

Explanation of Solution

The capital budgeting is a process to estimate the cash generated and used from a project or new plant.
The net income is just a measure of profitability and doesn’t reflect the actual cash that is available for investment.

Conclusion

So, the reason to consider cash flow is that actual cash is required and spent for the projects or expansion plans of a company.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Accrued Interest PayableCompute the interest for December accrued on each of the following notes payable owed by Riff-Raff'n Yell Inc., on December 31: Day of Calendar: 1 Lender: New Age Principal: $10,000 Interest Rate: 5% Term (Days) 120 Day of Calendar: 8 Lender: Wyvern Tavern Principal: $8,000 Interest Rate: 6% Term (Days) 90 Day of Calendar: 17 Lender: Cedar Tree Principal: $15,000 Interest Rate: 4% Term (Days) 90 Note: Use 360 days for calculations and round to the nearest dollar. Riff-Raff'n Yell, Inc. Lender (in alphabetical order) Accrued Interest Cedar Tree Answer 1 New Age Answer 2 Wyvern Tavern Answer 3

Question Footfall afacturing pers The following fancial information at the end of the current years Inventory turnover ratio Fixed accetturnover ratio bot to assets ratia set profit ang ross profit margin the given information to fill at the templates for income statement and balance sheet geb In Statement of Footfall Manufacturing Ltd. for the year ending RELEASED BY THE CL MOME2003, FEBRUARY 9, 3005 Sales December 31, 20 Cast of other expec Earnings befo Camings after

Treasury securities are issued and backed by the U.S. government and, therefore, are considered to be the lowest-risk securities on the market. As an investor looking for protection against inflation, you are considering the purchase of inflation-adjusted bonds known as U.S. Treasury Inflation-Protected Securities (TIPS). With these securities, the face value (which is paid at maturity) and the bond interest rate (which is paid semiannually) is regularly adjusted to account for inflation. However, for this problem only, assume the semi-annual interest payment (called the bond dividend) remains the same. You purchased a 10-year $10,000 TIPS bond with dividend of 4% per year payable semiannually (i.e., $200 every 6 months). Assume there is no inflation adjustment for the first 5 years, but in years 6 through 10, the bond face value increases by $850 each year. You use an expected investment return of 11% per year compounded semiannually. NOTE: This is a multi-part question. Once an…

Answer 2

Question

Chapter 12, Problem 1Q

Summary Introduction

To explain: The reason to focus on cash flow instead of net income in capital budgeting.

Introduction:

Operating Cash Flow:

The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Expert Solution & Answer

Answer to Problem 1Q

Cash flow is used instead of accounting income because actual cash is required and spent for the projects or expansion plans of a company.

Explanation of Solution

The capital budgeting is a process to estimate the cash generated and used from a project or new plant.
The net income is just a measure of profitability and doesn’t reflect the actual cash that is available for investment.

Conclusion

So, the reason to consider cash flow is that actual cash is required and spent for the projects or expansion plans of a company.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 12, Problem 1Q

Summary Introduction

To explain: The reason to focus on cash flow instead of net income in capital budgeting.

Introduction:

Operating Cash Flow:

The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Expert Solution & Answer

Answer to Problem 1Q

Cash flow is used instead of accounting income because actual cash is required and spent for the projects or expansion plans of a company.

Explanation of Solution

The capital budgeting is a process to estimate the cash generated and used from a project or new plant.
The net income is just a measure of profitability and doesn’t reflect the actual cash that is available for investment.

Conclusion

So, the reason to consider cash flow is that actual cash is required and spent for the projects or expansion plans of a company.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 12, Problem 1Q

Summary Introduction

To explain: The reason to focus on cash flow instead of net income in capital budgeting.

Introduction:

Operating Cash Flow:

The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Expert Solution & Answer

Answer to Problem 1Q

Cash flow is used instead of accounting income because actual cash is required and spent for the projects or expansion plans of a company.

Explanation of Solution

The capital budgeting is a process to estimate the cash generated and used from a project or new plant.
The net income is just a measure of profitability and doesn’t reflect the actual cash that is available for investment.

Conclusion

So, the reason to consider cash flow is that actual cash is required and spent for the projects or expansion plans of a company.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 12, Problem 1Q

Summary Introduction

To explain: The reason to focus on cash flow instead of net income in capital budgeting.

Introduction:

Operating Cash Flow:

The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Expert Solution & Answer

Answer to Problem 1Q

Cash flow is used instead of accounting income because actual cash is required and spent for the projects or expansion plans of a company.

Explanation of Solution

The capital budgeting is a process to estimate the cash generated and used from a project or new plant.
The net income is just a measure of profitability and doesn’t reflect the actual cash that is available for investment.

Conclusion

So, the reason to consider cash flow is that actual cash is required and spent for the projects or expansion plans of a company.

Answer 6

Chapter 12, Problem 1Q

Summary Introduction

To explain: The reason to focus on cash flow instead of net income in capital budgeting.

Introduction:

Operating Cash Flow:

The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Expert Solution & Answer

Answer to Problem 1Q

Cash flow is used instead of accounting income because actual cash is required and spent for the projects or expansion plans of a company.

Explanation of Solution

The capital budgeting is a process to estimate the cash generated and used from a project or new plant.
The net income is just a measure of profitability and doesn’t reflect the actual cash that is available for investment.

Conclusion

So, the reason to consider cash flow is that actual cash is required and spent for the projects or expansion plans of a company.

Answer 7

Chapter 12, Problem 1Q

Summary Introduction

To explain: The reason to focus on cash flow instead of net income in capital budgeting.

Introduction:

Operating Cash Flow:

The amount of cash used in or generated from the operations of the business is reported under the category of operating cash flow in the statement of cash flow. This is prepared as a part of financial statement at the end of an accounting period. The net balance is calculated and depicted as net cash from operating activities.

Answer 8

Expert Solution & Answer

Answer to Problem 1Q

Cash flow is used instead of accounting income because actual cash is required and spent for the projects or expansion plans of a company.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The capital budgeting is a process to estimate the cash generated and used from a project or new plant.
The net income is just a measure of profitability and doesn’t reflect the actual cash that is available for investment.

Answer 12

Conclusion

So, the reason to consider cash flow is that actual cash is required and spent for the projects or expansion plans of a company.

Answer 13

Ch. 12 - Prob. 1Q Ch. 12 - Prob. 2Q Ch. 12 - Explain why net operating working capital is...Ch. 12 - Prob. 4Q Ch. 12 - Prob. 5Q Ch. 12 - Prob. 6Q Ch. 12 - Prob. 7Q Ch. 12 - Prob. 8Q Ch. 12 - Prob. 9Q Ch. 12 - If you were the CFO of a company that had to...

Answer to Problem 1Q

Explanation of Solution

Want to see more full solutions like this?

Chapter 12 Solutions