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    Management Accounting: Company Goals and Depreciation

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    1. The CFO of your company comments, "I don't understand why other companies waste so much time by creating budgets. I set company goals, and everyone strives to meet them." Is this a valid approach? How would you respond to the CFO?

    2. A classmate in your accounting class says, "Depreciation is a source of cash flow for a company. We even include it in our NPV analysis." Is your classmate's assertion correct? Explain.

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    Solution Preview

    1. No it's not a valid approach. Company goals are set based on the budget prepared by the finance department. It's impossible to find out a way for the company operation. Companies prepare budget to get a direction for there operation. Budgeting also acts as a benchmark for the performance of the company. ...

    Solution Summary

    This response compares company goals and budgets. It also explains depreciation and NPV analysis.