The two cardinal rules that financial analysts follow to avoid capital budgeting errors are (1) capital budgeting decisions must be based on accounting income,and (2) all incremental cash flows should be considered when making accept/reject decisions.

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The statement is false. The two cardinal rules that financial analysts follow to avoid capital budgeting errors are (1) capital budgeting decisions must be based on cash flows, not accounting income and (2) all relevant cash flows, both positive and negative, should be considered when making accept/reject decisions.

The Two Cardinal Rules That Financial Analysts Follow to Avoid