A Reason That a Small Firm Would Not Use a Discounted

question 12

Multiple Choice

A reason that a small firm would not use a discounted cash flow technique in evaluating capital investments would be that

• A) the accounting rate of return is better for a small firm.
• B) liquidity is less of an issue for a small company.
• C) small firms invest more in short-term assets than do large companies.
• D) nonfinancial issues may be more important for a small firm.

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Definitions:

Operating Expenses

The ongoing costs incurred in the day-to-day operations of a business, excluding costs associated with the production of goods or services.

Gross Collection Ratio Formula

A financial metric used to assess the efficiency of a company's collections department, calculated by dividing total collections by the total amount of billable charges.

Total Charges

The complete amount of money required for a particular service, product, or procedure, including all associated costs and fees.

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