Which of the Following Rules Are Essential to Successful Cash

question 10

Multiple Choice

Which of the following rules are essential to successful cash flow estimates,and ultimately,to successful capital budgeting?

• A) The return on invested capital is the only relevant cash flow.
• B) Only incremental cash flows are relevant to the accept/reject decision.
• C) Total cash flows are relevant to capital budgeting analysis and the accept/reject decision.
• D) All of the above are correct.
• E) Only answers a and b are correct.

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Definitions:

Sales Tax Payable

A liability account in the general ledger that accumulates the amount of sales tax collected from customers on behalf of local or state tax authorities, to be remitted in the future.

Estimated Returns Inventory

A reserve account used by companies to account for anticipated returns of sold goods, affecting the overall sales and inventory levels.

FOB Destination

A shipping term indicating that the seller is responsible for the goods and the shipping cost until the goods reach the buyer's specified location.

Cost of Inventory

The total cost incurred to acquire stock items that are intended for resale, including purchase price, freight, and handling fees.