In most capital budgeting decisions the emphasis is on reported earnings rather than cash flows.

Question

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The emphasis in capital budgeting decisions is on cash flows rather than reported earnings because cash flows reflect the actual cash inflows and outflows of the project, while reported earnings can be affected by non-cash items such as depreciation or amortization. Cash flows are a more reliable measure of a project's profitability and ability to generate future cash flows.

In Most Capital Budgeting Decisions the Emphasis Is on Reported