--%>

Why do focusing on cash flows rather than profits

Why do we focus on cash flows rather than profits while evaluating proposed capital budgeting projects?
We targeted on cash flows instead of profits while evaluating proposed capital budgeting projects since it is cash flow that changes the value of a firm. You can spend cash however you cannot spend profit.

   Related Questions in Finance Basics

  • Q : Describe significance of excess reserves

    Normal 0 false false

  • Q : Resolving ranking conflict Describe how

    Describe how to resolve a "ranking conflict" among the net present value and the internal rate of return. Why should the conflict be resolved as you described? Whenever there is a ranking conflict among net present value and internal rate of re

  • Q : What is a Provision Provision : The

    Provision: The language in a bill or act which imposes necessities or constraints on actions or expenditures of the state. The provisions are frequently employed to constrain the expenditure of appropriations however it might also be employed to give

  • Q : Describe EU Normal 0 false false false

    Normal 0 false false

  • Q : Mascot Simulation Simulation with

    Simulation with Crystal Ball Provided Workbook: Mascot Simulation Relevant Readings:"Discounted Cash Flow Modeling" folder + Text

  • Q : In which ratios long-term bond investor

    Which ratios would a potential long-term bond investor is most interested in? Describe. Current & potential lenders of long-term funds, such like banks & bondholders, are interested in debt ratios.  While a business's debt ratios ri

  • Q : Define Federal Fiscal Year Federal

    Federal Fiscal Year (FFY): The twelve month accounting period of the federal government, starting on October 1 and ending the following September 30. For illustration, a reference to FFY 2013 means the period starting October 1, 2012 and ending at Sep

  • Q : Major effects of this price floor

    Normal 0 false false

  • Q : Define Augmentation Augmentation : An

    Augmentation: An authorized raise to a formerly authorized appropriation or allotment. This augment can be authorized by the Budget Act provisional language, control sections, or other legislation. Generally a Budget Revision or an Ex

  • Q : Compare and contrast the book value and

    Compare and contrast the book value & liquidation value per share for common stock. Is one method more reliable? Describe.The Book Value of a firm's common stock is found by subtracting the value of the firm's liabilities, and preferred stoc