Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile?
A) They do not tell how the decision affects the firm's reported profits from an accounting perspective.
B) They are not easily predicted from historical financial statements of a firm and its competitors.
C) These earnings are not actual cash flows.
D) They do not show how the firm's earnings are expected to change as the result of a particular decision.

Question

Quizplus · Accepted Answer

Predicted incremental earnings are not actual cash flows, meaning that they do not reflect the actual monetary gains or losses resulting from a decision. Other factors, such as cash flow timing and the cost of capital, also need to be considered in determining whether a decision is worthwhile.

Which of the Following Best Describes Why the Predicted Incremental