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Chapter 6
Relevant costs and revenues
Decision making involves making a choice between two or more
alternatives.
When a business is making one of the short-term decisions mentioned it should
only consider the relevant cash flows that arise as a result of this decision:
Cash position if accept proposal A
Relevant cash flow = A–B
Cash position if reject proposal B
(and do next best alternative instead)
A relevant cash flow is a 'future incremental cash flow'.
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