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:

Liabilities

Financial obligations or debts owed by a person, company, or entity to others.

Assets

Resources with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit.

Checkable Deposits

Bank account balances that can be accessed using checks, debit cards, or electronic transfers and are very liquid.

Required Reserve Ratio

The fraction of deposits that banks are mandated by regulation to hold in reserve and not lend out.