The Two Cardinal Rules Which Financial Analysts Follow to Avoid

question 8

True/False

The two cardinal rules which financial analysts follow to avoid capital budgeting errors are: (1) capital budgeting decisions must be based on accounting income, and (2) only incremental cash flows are relevant to accept/reject decisions.

---

Definitions:

Conditioning Process

The method by which organisms learn to associate different stimuli and behaviors through reinforcement or punishment.

Instinctive Drift

The tendency for animals to revert to instinctual behaviors even after learning new behaviors that contradict those instincts.

Food-Washing Behaviour

A learned or instinctual behavior observed in some animal species where they wash their food in water before eating.

Observational Learning

A learning process through which behaviors are acquired by watching and imitating others, also known as modeling.