Which of the Following Is a Reason That a Small

question 58

Multiple Choice

Which of the following is a reason that a small firm would NOT use a discounted cash flow (DCF) technique in evaluating capital investments?

• A) Company management has a preference for another quantitative method.
• B) Liquidity is less of an issue for a small company.
• C) Financial management talent within a small firm is a scarce resource.
• D) Small firms invest more in short-term assets than large companies.

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Definitions:

Economic Recession

A short-term economic slump marked by lower levels of commerce and industrial production, usually indicated by two successive quarter declines in the Gross Domestic Product.

Production

The process of creating goods or services through the combination of labor, materials, and technology.

Inventory Carrying Costs

The expenses related to storing unsold goods, including warehousing, insurance, depreciation, and opportunity costs.

Purchasing Costs

The total expenses incurred in buying goods or services, including the price of the product, taxes, shipping, and handling fees.