Research Assignment ACCT 311 The Cash Flow Statement: Problems with the Current Rules This article is about the cash flow statement and its problems with the current rules. It was written by Neil S. Weiss and James G.S. Yang. The cash flow statement has been used to give information about a company’s performance, as well as well as its major activities during the year. However, some of the rules for preparation make the cash flow statement less useful than it should be. Based on the article
Words: 961 - Pages: 4
In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement,[1] is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business. The statement captures both the current operating results and the accompanying changes
Words: 2959 - Pages: 12
Investment Criteria Analysis 1. Introduction: Any investment decision depends upon the decision rule that is applied under circumstances. However, the decision rule itself considers following inputs. Cash flows, Project Life, and Discounting Factor The effectiveness of the decision rule depends on how these three factors have been properly assessed. Estimation of cash flows requires immense understanding of the project before it is implemented; particularly macro and micro view of the
Words: 2653 - Pages: 11
Roberts 2 1 1 Discounted Cash Flows (DCF) A Tool for Rational Decision Making What can be an object of capital budgeting procedures? » There must be a choice - choose a base case and an alternative. (Do nothing/status quo) Identify incremental cash flows from project » Treat as incremental cash flows to shareholder (marginal impact) Calculate the value of the project. » Taking into account timing and risk (t and re) » Aggregate cash flows into one single number Show that doing
Words: 1694 - Pages: 7
Investment appraisal methods used in practice • How much will I get back ? • When will I get the income ? • 4 main techniques available ranging from simple to moderately complex MULTIPLE APPRAISAL METHODS: Non‐discounted cash flow techniques: 1. Payback period (PBP) 2. Accounting rate of return (ARR/ROCE/ROI) Discounted cash flow techniques(DCF): 3. Net Present Value (NPV) 4. Internal Rate of Return (IRR) 6 1 MBA7001 Accounting for Decision-Makers Week 6 Lecture – Capital Investment Appraisal Objectives (1)
Words: 1779 - Pages: 8
DECISION AND CASH FLOWS A positive net present value (NPV) is a direct estimate of value creation for shareholders and is an operational way of carrying through on the strategy of trying to maximize shareholder wealth. To calculate NPV, however we need to estimate the cash costs and benefits of any decision at hand. In this note we discuss the evaluation of investment proposals. Cash Flows: Basic Concepts The cash flows that we will use in our analysis are incremental after-tax cash flows. The incremental-cash-flow
Words: 6624 - Pages: 27
value (NPV) and internal rate of return (IRR) Describe the non-DCF evaluation criteria: payback and accounting rate of return Illustrate the computation of the discounted payback Compare and contrast NPV and IRR and emphasize the superiority of NPV rule 12/24/2012 Prof.Dr. Anuj Verma 3 Nature of Investment Decisions The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm’s investment decisions would generally include
Words: 1004 - Pages: 5
viability of the project using the NPV, IRR, and Payback methods. 2. Assignment Part B “The IRR rule is redundant as an investment criterion because the NPV rule always dominates. Discuss this statement giving examples where possible. 3. Conclusion “The IRR rule is redundant as an investment criterion because the net present value (NPV) rule always dominates it.” 4. Bibliography References Assignment Part A
Words: 2195 - Pages: 9
Discuss the NPV decision rule, and how it relates to the goal of maximizing shareholders’ wealth. To make sensible investment decisions, a good financial analyst should use a method that considers all of the costs and benefits of each investment opportunity, and makes a logical allowance for the timing of those costs and benefits. The net present value (NPV) method provides for these investment assessment criteria. The NPV is a financial valuation concept that is essential to all financial modeling
Words: 667 - Pages: 3
Other than simply inspecting the cash flows, NPV method, IRR method, Payback period method and PI method are three most popularly used quantitative methods to do capital-budgeting analysis. Among the three methods, NPV is better than the other two methods in most situations. 1. Definition 2. Calculation results under different methods Using the mentioned 4 methods and Excel, the following calculating result can be achieved. Project | 1 | 2 | 3 | 4 | 5 | NPV | 73.09 | -85.45 | 793.92
Words: 645 - Pages: 3
