Which of the Following Statements Is True

question 96

Multiple Choice

Which of the following statements is true?

• A) Accountants measure cash flows on a cash basis rather than an accrual basis.
• B) Financial analysts focus solely on accrual basis values rather than cash flows when evaluating potential investments.
• C) Incremental cash flows effectively represent the marginal costs and marginal benefits expected to result from undertaking a proposed investment.
• D) Both (a) and (c) are true.
• E) All of the above statements are true.

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Definitions:

Operating Cash Flows

Operating cash flows are the amounts of cash a company generates from its regular business operations, contrasting with cash flow from investing and financing activities.

Depreciated

The decrease in value of an asset over time, often due to wear, tear, or obsolescence.

Salvaged

Refers to assets that have been recovered, reused, or sold after being discarded or considered waste.

Tax Shield Approach

A financial strategy that utilizes deductible expenses, like interest, to reduce a company's taxable income, thereby lowering its tax liability.