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Analyze relevant cash inflows and outflows for capital budgeting decisions.

Analyze relevant cash inflows and outflows for capital budgeting decisions.

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Answer #1

Capital Budgeting decisions are completely based on the cash inflows and cash outflows from a particular project whether to choose it or not. When the cash inflows are more than the cash outflows in the current period or future period then it is positive so that particular project can be chosen but if the cash outflows are more than the cash inflows in the current period or future period from that project then it is not suggested to choose it due to losses.

Therefore, cash inflows and cash flows are relevant in the capital budgeting decisions.

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