Answered: Explain the difference between: a)…

Explain the difference between: a) Cash Flows versus Accounting Estimates b) Static Payback Period versus Dynamic Payback Period c) Absolute Profitability versus Relative Profitability

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter24: Analysis Of Financial Statements

Section: Chapter Questions

Problem 5MC

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Explain the difference between:

a) Cash Flows versus Accounting Estimates

b) Static Payback Period versus Dynamic Payback Period

c) Absolute Profitability versus Relative Profitability

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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