Incremental cash flow approach:
A) Analyzes the additional cash inflows and outflows for a specific decision
B) Is not useful for decision-making
C) Is a search for as many cash flows as possible so they can all be used in decision-making.
D) Includes unavoidable cash flows

Question

Quizplus · Accepted Answer

The incremental cash flow approach involves analyzing the additional cash inflows and outflows that result from a specific decision. This allows decision-makers to determine the net impact of a decision on cash flow and helps in making informed choices. Therefore, option A is the correct answer. Option B is incorrect as the incremental cash flow approach is useful for decision-making. Option C is inaccurate as the approach focuses on identifying relevant cash flows rather than finding as many as possible. Option D is incorrect as unavoidable cash flows are already accounted for in the incremental cash flow approach.

Incremental Cash Flow Approach