A Reason That a Small Firm Would Not Use a Discounted

question 71

Multiple Choice

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

• A)company management has a preference for another quantitative method.
• B)liquidity is less of an issue for a small company.
• C)non-financial issues may be more important for a small firm.
• D)small firms invest more in short-term assets than large companies.

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Definitions:

Revealed Preference

An economic theory that determines preferences by observing consumer choices and behaviors rather than through direct inquiry.

Inflation Level

The speed at which average prices for products and services increase, leading to a decrease in buying power.

Base Year

A specific year against which economic growth or other financial figures are measured and compared.

Paasche Index

An index used to measure price level changes over time by comparing the current price of a basket of goods to its price in a base year, weighting the current period quantities.