Capital budgeting decisions must be based on the accounting income the project generates since shareholders are concerned with the reported net income the firm generates.

Question

Quizplus · Accepted Answer

Capital budgeting decisions should be based on the cash flows generated by the project, not the accounting income. Shareholders are interested in the cash flows and the return on investment, not just the reported net income.

Capital Budgeting Decisions Must Be Based on the Accounting Income