The Objective of Capital Rationing Is to Select the Group

question 93

True/False

The objective of capital rationing is to select the group of projects that provides the highest overall net present value and does not require more dollars than are budgeted.

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Definitions:

Direct Method

A cash flow statement preparation method that shows the specific sources of operating cash receipts and payments.

Indirect Method

A financial reporting approach used in cash flow statements where net income is adjusted for non-cash transactions, depreciation, and changes in working capital to determine cash flow from operating activities.

Direct Method

A cash flow statement preparation approach that itemizes actual cash inflows and outflows from operating activities, as opposed to estimating them through indirect adjustments.

Expenses and Losses

Costs incurred in the operation of a business (expenses) and decreases in value not directly related to operations (losses).