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When Cash & Capital Flow is temporarily depressed due to strikes, litigation, warranty claims, or other...

When Cash & Capital Flow is temporarily depressed due to strikes, litigation, warranty claims, or other one-time events, it is generally safe, for modeling purposes, to assume that cash flow will recover over time. True or False

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Answer #1

ANSWER

The given Statement is TRUE

EXPLANATION :

For Valuations and Modelling purposes we do not account for all the transactions that are Non-Recurring in nature. The reason is that such events are "Abnormal events" which probably might not repeat so taking into consideration the effect of such events would not reflect "true &fair view' of our valuation of modelling. Following Prudence view, we believe that such Losses in Cashflows due to such Abnormal events will get recovered as such events wont repeat easily again which is a logical treatment aswell because for instance Strikes and Litigations do not happen on a regular basis in any entity.

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