Cash Flows Is the Most Relevant Variable to Measure the Returns

question 42

True/False

Cash flows is the most relevant variable to measure the returns on debt instruments,while GAAP net income is the most relevant variable to measure the returns on common stock.

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Definitions:

Net Present Value

This is a calculation that estimates the value of an investment adjusted for its time value of money, essentially determining the present value of its future cash flows minus the initial investment.

Fixed Assets

Tangible assets, such as buildings and machinery, used in operations and not intended for resale, providing long-term financial benefit.

Rights Offering

A financial mechanism by which existing shareholders are given the right to buy additional shares directly from the company, usually at a discount to the current market price.

Market Price

The price at which the market currently values the buying or selling of an asset or service.