If financial statement data are used to evaluate a decision to discontinue a business:
A) Managers need to identify relevant and irrelevant cash flows
B) Average costs should be used
C) Qualitative factors are irrelevant
D) Only the statement of profit or loss should be considered

Question

Quizplus · Accepted Answer

Managers need to identify relevant and irrelevant cash flows because relevant cash flows (those that will change as a result of the decision) are crucial for making informed decisions about discontinuing a business. Costs that do not change with the decision (irrelevant costs) should not impact the decision-making process.

If Financial Statement Data Are Used to Evaluate a Decision