The Zingstad Corporation Is Considering an Investment with the Following

question 173

Multiple Choice

The Zingstad Corporation is considering an investment with the following data (Ignore income taxes.) : Cash inflows occur evenly throughout the year. The payback period for this investment is:

• A) 3.0 years
• B) 3.5 years
• C) 4.0 years
• D) 4.5 years

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Definitions:

Accounting Statements

Financial documents that provide an overview of a company's financial condition, including income statement, balance sheet, and cash flow statement.

Ratios

Quantitative measures used to assess the financial performance, liquidity, efficiency, or risk of a business entity.

Current Ratio

This ratio indicates how well a business can settle its short-term debts with assets that are readily available.

Acid-test Ratio

A stringent indicator of a company’s short-term liquidity, calculated by dividing liquid assets by current liabilities, excluding inventory.