Provide a brief explanation of why depreciation of capital assets is considered in determining potential net income from an investment, but not included in determining the net cash flow of an investment.

Provide a brief explanation of why depreciation of capital assets is considered in determining potential net income from an investment, but not included in determining the net cash flow of an investment.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Identify the cash flow series associated with production or service over thelife of the asset?

A: Definition: Cash inflows: The amount of cash received by a company from the operating, investing,…

Q: This is a term to describe non-physical assets like stocks and bonds that get their value from…

A: Non-physical assets are intangible resources that a company or individual owns. These assets do not…

Q: How is the value of an asset determined by predicted future cash flows?

A: The Answer

Q: Which of the following is excluded when projecting future cash flows for the purpose of determining…

A: As per International Accounting Standard 36 Impairment of assets When projecting future cash flows…

Q: How do you evaluate an asset whose value is predicated on future cash flows?

A: Assets are the resources that are generally used for the purpose of revenue generation by the…

Q: Justification for adding depreciation expenditures to net income in the operating activities portion…

A: The cash flow statement is prepared to record the cash flow from various activities during the…

Q: Which of the following is an External sources of finance? a. Depreciation funds b. Retained…

A: Two sources of finance Internal and external

Q: What is the maturity period required for an investment to qualify under the definitions of a cash…

A: Cash and cash equivalents correspond to just the line item on the balance sheet that lists the value…

Q: How can you explain working capital management? Explain different policies/approaches to manage…

A: The working capital is the capital that is used in the business for successful running of day to day…

Q: Accounting type Question: Sale of long term investment indicates: A. a change in current assets B.…

A: Fund flow statement is a statement prepared to know the reason for change in the financial statement…

Q: hat does it mean by analyse profitability of invested capital

A: Introduction : In simple words, invested capital refers to the sum of all the funds that a business…

Q: A capital expenditure would be: Group of answer choices added to the cost of the asset ignored…

A: The Capital expenditure is that expenditure which is incurred for long term benefits. The benefits…

Q: Why might the riskiness of cash flow from the residual value of the real estate differ from the…

A: It is nothing but the salvage value or scrap value of an asset. It speaks to the measure of…

Q: how can the gain on the sale of invesment be a deduction from net income in determining the cash…

A: Statement of cash flows: Cash flow statement is also known as statement of cash flows. It is a…

Q: Cash flow example from an investing activity is a. Issue of Equity b. Redemption of Debenture c.…

A: Cash Flow is a statement which shows the inflow and outflow of the transactions related to cash. It…

Q: “Depreciation expenses have no effect on cash flows and, therefore, are not relevant in…

A: Depreciation expenses have no effect on cash flows and, therefore, are not relevant in…

Q: when considering the Basic Ideas of Finance, what are the purposes and uses of assets?

A: Assets: Assets represent a resource having economic value owned by an entity, person, company, etc.…

Q: Explain why, when utilizing the indirect method, depreciation expenditure, depletion expense, and…

A: Here is the Answer

Q: Explain the Principle of Investing in Financial Assets?

A: Securities are the financial assets that are traded in the financial or secondary or securities…

Q: What is the Principle of Investing in Financial Assets?

A: A financial asset is a liquid asset that gets its value from an authoritative right or guarantee to…

Q: how can depreciation be a cash flow?

A: Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its…

Q: 2. Which of the following best explains the meaning of the term 'capital expenditure'. Capital…

A: Capital expenditure is the long term expenditure of the company.

Q: How to determining optimal capital structure?

A: Optimal Capital Structure: It is the best debt and equity mix financing that minimizes the cost of…

Q: Short-term investment and long-term investment will be recorded in what type of financial statement…

A: Balance sheet refers to the one of the financial statement of a company which reflects the overall…

Q: Why do we exclude depreciation expense and the gain or loss on sale of an asset from the operating…

A: Operating activities are the activities that are related to the ongoing business of an individual or…

Q: If an asset is sold at a gain why is the gain subtracted from net income when computing the net cash…

A: Statement of cash flows: It is one of the financial statement that shows the cash and cash…

Q: What is a capital asset? Why do we care about the treatment of assets as either capital or…

A: Capital assets is an assets which are generally not meant for sale but for investment purpose which…

Q: The indirect approach subtracts depreciation costs from net income before calculating operating cash…

A: Given : The question explains about Using the indirect technique, depreciation expenses are…

Q: What are the common internal controls in place for capital expenditure cycle? with explanations

A: Internal control is an important part of every organization. It helps in maintaining the efficiency…

Q: What is the difference between authorized capital, issued capital and additional paid in capital?

A: The assets and cash of a firm are referred to as capital. Capital might be cash, machinery,…

Q: he purpose of depreciation expense

A: Depreciation is a measure of wearing out of assets from its use efflux over time or obsolete through…

Q: Discuss the different types of risk that an investor may face when undertaking investment in…

A: Risk is the chance of not getting the amount or kind of return which an investor is expecting from…

Q: Which of the following formulas will correctly calculate Net Working Capital? A. Current…

A: The objective of the question is to identify the correct formula for calculating Net Working Capital…

Q: Distinguish different categories of cash flows to be considered in an equipment-replacement decision…

Q: An investment property is considered to generate cash flows that are?

A: Investment property can be defined as the property consisting of land or building which is not…

Q: only interested in measuring cash flows when they actually occur, not when they accrue as an…

A: the company makes an investment in the project an individual make investment in various types of…

Q: 1. Identify a basis that cannot be used for the measurement of the elements of financial statements.…

A: Financial statements are statements or reports that are prepared at the end of the financial…

Q: What is the first impact on asset turnover of promptly expensing a cash outlay compared to…

A: The Answer :

Q: When an asset is sold at a gain, why is the gain not reported as a cash inflow from operating…

A: Cash Flow Statement: Cash Flow Statement is a fundamental financial statement that renders valuable…

Question

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).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Which of the following phrases best describes the term " actual cash value"? a. market value b. appraised value c. replacement cost less depreciation d. original cost less depreciation
An asset is anything that is a resource of value that can be converted into cash. Individuals, companies, and even governments own assets. Explain the importance of the correct determination of an assets value and its effect on one of the financial statements.
Select all that are true with respect to depreciation. Group of answer choices Depreciation is a cash flow outflow at the time it is recorded in the financial statements Depreciation itself is not a cash flow Accounting depreciation impacts cash flow, Tax depreciation does not Accounting depreciation does not impact cash flow, Tax depreciation does impact cash flow The depreciation tax shield is a relevant cash flow for decision making
In a cash flow statement which one of the following would appear as an inflow of cash? O The profit on sale of a fixed asset. A repayment of debenture loans. An issue of shares at a premium, An increase in stock during the year.
how to decide and choose between investments if capital is rationed? Assess the timing effect of taxation liabilities upon investment appraisal decisions.
acquiring capital assets for future use is one type of capital expenditure proposal. true or false
How is valuation of any financial asset related to future cash flows?
Why is Cash Flow affected by depreciation.
Explain the after-tax effect on cash of disposing of assets. Short answer please
Describe your understanding of the term "Financial Capital." When it comes to capital, what is the difference between financial and physical capital?
Why isn’t accounting net income used in the net present value method of making capitalbudgeting decisions?
Which of the following sections of the statement of cash flows include activities that increase and decrease long-term assets? the investing activities section Should not be reported on cash flow statement OO the financing activities section the operating activities section