Small businesses make less use of discounted cash flow (DCF) capital budgeting techniques than large businesses. This may reflect a lack of knowledge on the part of small firms' managers, but it may also reflect a rational conclusion that the costs of using DCF analysis outweigh the benefits of these methods for very small firms. True or False? And Why?

Question

Giana Frederick

Business

30 April, 23:09

Small businesses make less use of discounted cash flow (DCF) capital budgeting techniques than large businesses. This may reflect a lack of knowledge on the part of small firms' managers, but it may also reflect a rational conclusion that the costs of using DCF analysis outweigh the benefits of these methods for very small firms. True or False? And Why?

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Answers (1)

Know the Answer?

Tiana Ortiz · Answer 1

The given statement is true.

Explanation:

The reason for why this statement is true is discussed below:

The discounted cash flow is also called as DCF which is very important to determine the value of a business because it tells about the impact of today's investment in the future cash flows. It gives us information about the worth of share of a business as small business don't have that large scale arrangements or larger cash flows so the budgeting techniques of the DCF are less beneficial for the small scale business.