Question

Empirical observations show that capital budgeting cash flow analyses or projections are not commonly used in...

Empirical observations show that capital budgeting cash flow analyses or projections are not commonly used in practice especially among small firms, which often prefer to use accounting numbers instead. What is the most likely explanation of this behavior? Do you think this is appropriate? Explain

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

small firms generally do not opt with capital budgeting process through estimation of the cash flow because they do not have an optimum mechanism for projection of the future cash flows related to project as they are provided with less capital and it is an experts work to project the optimum future cash flow related with the project and it needs a special mechanism and process so small firms are not able to finance with those experts to decide with the future cash flow.

Capital budgeting is a complex process which involves a large degree of financial forecasting in order to project the future cash flow related to a project and it is too costly for a small firm to bear.

Hence they stick to accounting numbers and they decides their capital budgeting should be based upon accounting numbers.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The purposes of this article, capital assets are defined as tangible or intangible assets that are...
The purposes of this article, capital assets are defined as tangible or intangible assets that are used in operations and that have useful lives of more than one year, such as land and improvements to land, buildings and building improvements; vehicles; machinery; equipment; and sewer, water and highway infrastructures. Risk Assessment: A municipality’s capital assets are subject to a number of risks. Local officials must be cognizant of these risks as they seek to effectively manage their municipality’s capital assets....
Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer....
Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer. ____ 2. Consumers should purchase quantities of a good to the point where MU > P. ____ 3. Voluntary exchange requires that there must be mutual gain. ____ 4. Points along a budget line represent the maximum combinations of two commodities that a consumer can afford. ____ 5. The budget line represents a consumer's preferences for a commodity. ____ 6. A change in consumer...
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT