pev revision game

noodles

What is an adverse affect on a profit?

SandyHood

A: Something that makes a profit decrease.

Q: Why is Life Cycle Costing better if you discount the annual cash flows?

swampy1901

A: Most Life cycle costing is concerned with the actual set up of a product usually involving research, developing the product from the beginning until the product is no longer made. If the company can gauge how many products will be made then it can reasonably calculate the whole cost.
Over a 5 year period for example you can assume that Product X will cost this amount and generate that amount.
So annual cash flows in this event are unlikely to be unpredictable but not sure why you would to discount them from your annual cash flow. Because if you have done your research you know that you are producing Product X for 5 years anyway because you have a market for them!

Put me out of my misery Sandy!! On my umpteenth retake - I am going to pass this time!! I am!! I am!!



Q. What do Performance Indicators show about businesses?

SandyHood

Discounting the cash flows in the future to their present values enables the managers to take account of the fact that money received or paid a year from now is not worth as much as that same cash flow now.