superiority of cash flow techniques in investment appraisal

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February 10, 2017 at 10:41 am #371848
Vipin
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why is that cash flow techniques like NPV, IRR is considered superior to methods like ARR which considers annual operating profit?

One reason I could think of is that, a profit can be manipulated by managers.
February 10, 2017 at 4:12 pm #371866
Ken Garrett
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The other main reason is that NPV and IRR take into account the time value of money. That concept is the foundation of discounting.
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