Question

how are Ethical constraints are implied when there are ethical sides of business decisions that could be significate in how cash flow is forecasted?

Answer 1

Ethical constants means that those ethical standards which are not legal in nature but it should be followed by the company as it is accepted within the societal norms and it should be done without offending anyone in the society.

The ethical constants helps in forecasting of cash flows which are related to formt by an approach of conservative principles through which cash flows are estimated to be lowered as there are various kinds of agency problem which are associated with the company and there are also manipulation in the books of accounts. There are also disclosure manipulations as well.

Ethical constraints always focuses on discounting the cash flows on the basis of these factors and it also incorporate these negative factors into cash flows account it and then forecasts the overall cash flow of the company.