Question
Why is it appropriate to use after-tax cash flows in decision making
why is it appropriate to use after-tax cash flows in decision making
Answers
Answer:
Cash flow after taxes determines whether a business is generating positive cash flows after income taxes effects have been included. Cash flow after tax shows how much money a project or investment makes. This cash is available for the companies and they can take business decisions without any mandatory expenditure like taxes.
If a company is not considering after-tax cash flows then while making business decisions like long term investment it might face shortage of cash as it has to pay taxes from the profits it made. Hence, it is appropriate to use cash flows after tax to set aside the cash required for business decisions.
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