Question

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?

Answer 1

Answer:

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.