If Future Cash Flows Are Not Discounted the Effect in the Financial

question 40

Multiple Choice

If future cash flows are not discounted the effect in the financial statements is to:

• A) Report amounts of cash outflows that are the same but occur over different time periods as the same amount.
• B) Report net cash flows at their future value rather than their present value.
• C) Understate the amount of the present obligation.
• D) Report net cash flows at their future value rather than their present value and understate the amount of the present obligation
• E) None of the given answers.

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Definitions:

Static Budgets

Static budgets are financial plans that do not change over the budgeting period, regardless of any changes in business activity levels or operating conditions.

Service Companies

Organizations that provide intangible products to their customers, usually offering professional advice or services rather than physical products.

Activity Levels

Refers to the volume of work or operations within a specific time frame in a business, affecting cost behavior and operational efficiency.

Goal Conflict

A situation where different parties have goals that are not aligned, leading to potential conflict or inefficiency.