The Current Cash Flow from Existing Assets Is Highly Relevant

question 53

True/False

The current cash flow from existing assets is highly relevant to the investor.However, since the value of the firm depends primarily upon its growth opportunities, profit projections from those opportunities are the only relevant future flows with which investors are concerned.

---

Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Manufacturing Costs

The total cost related to the production of goods, including raw materials, labor, and overhead expenses.

Variable Costing

A costing method that includes only variable production costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of a product.

Variable Production Costs

Costs that fluctuate with the level of output production, such as raw materials and direct labor.