How Can We Make a Financial Decision with Cash Flows

question 7

Essay

How can we make a financial decision with cash flows occurring at different points in time?

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Definitions:

Decentralization

The distribution of decision-making powers and authority away from a central location or authority to local or individual actors.

Authority

The legal or rightful power or right to make decisions, give orders, and enforce rules within a particular scope or role.

Operating Decisions

Choices made by management regarding the day-to-day operations of a business, such as pricing, inventory management, and employment levels.

Profit Center

A decentralized unit in which the manager has the responsibility and the authority to make decisions that affect both costs and revenues (and thus profits).