Capital budgeting relies on cash inflows and outflows as preferred inputs for calculations because

Question

Quizplus · Accepted Answer

Capital budgeting decisions involve investment in fixed assets that require significant cash outflows. Therefore, it is important for firms to determine when the cash will be returned and what the expected cash inflows will be in order to evaluate a project's profitability and feasibility. Cash inflows and outflows provide a more accurate and relevant representation of a project's financial impact than accounting figures.

Capital Budgeting Relies on Cash Inflows and Outflows as Preferred