The note presents a framework to measure the impact of the differential of several decision options on a company’s economic value. It highlights the fundamental concepts of cost, such as direct and indirect costs, variable and fixed costs, opportunity costs, breakeven point, sunk costs, etc. It also examines the factors influencing the decision-making process, like capacity utilization or possible restrictions. At last, in context of cash flow against the accounting earnings it compares the differential evaluation.
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