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On capital budgeting area, discuss why do managers focus on the impact that an investment will...

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Finance

On capital budgeting area, discuss why do managers focus on theimpact that an investment will have on reported earnings ratherthan on the investment’s cash flow consequences?

Please explain in detail with examples for 3-4 paragraph.

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Answer The managers will generally look business in a way of increasing Earnings per share EPS or Return on equity ROE that will help them earn their bonus it is usually safe to assume that the income statement will overstate profits Operating cash flow OCF of a company is arguably the most important barometer that investors use for judging corporate wellbeing Even though many investors incline towards net income operating cash flow is often seen as a better metric of a companys financial health for two important    See Answer
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On capital budgeting area, discuss why do managers focus on theimpact that an investment will have on reported earnings ratherthan on the investment’s cash flow consequences?Please explain in detail with examples for 3-4 paragraph.

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