Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following capital budgeting methods focus on cash flows rather than incremental operating income?

Net Present Value (NPV) and Internal Rate of Return (IRR)

Variable Costing

Accounting Rate of Return (ARR)

Absorption Costing

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Verified step by step guidance

Understand the concept of capital budgeting methods: Capital budgeting methods are techniques used to evaluate investment opportunities and decide whether they are worth pursuing. These methods often focus on either cash flows or accounting-based measures.

Identify the methods listed in the problem: The methods mentioned are Net Present Value (NPV), Internal Rate of Return (IRR), Variable Costing, Accounting Rate of Return (ARR), and Absorption Costing.

Clarify the focus of NPV and IRR: Both Net Present Value (NPV) and Internal Rate of Return (IRR) are capital budgeting methods that focus on cash flows. NPV calculates the present value of future cash flows minus the initial investment, while IRR identifies the discount rate that makes the net present value of cash flows equal to zero.

Explain the focus of ARR, Variable Costing, and Absorption Costing: Accounting Rate of Return (ARR) focuses on incremental operating income rather than cash flows. Variable Costing and Absorption Costing are methods of inventory costing and are not directly related to capital budgeting decisions.

Conclude the distinction: Since the question asks for methods that focus on cash flows, the correct answers are Net Present Value (NPV) and Internal Rate of Return (IRR), as they directly evaluate cash inflows and outflows associated with an investment.