Rather Than Using the Cash Method Accountants Prefer to Calculate

question 15

Multiple Choice

Rather than using the cash method accountants prefer to calculate profitability using the:

• A) adjusted approach.
• B) accrual approach.
• C) permanent approach.
• D) non-current approach.

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Definitions:

Present Value Factor

A factor used in discounting future payments or receipts to determine their present value, considering the time value of money.

Cash Flows

The movement of cash into and out of a business, reflecting operational, investing, and financing activities.

Annuity

A financial instrument that provides a consistent series of payments to a person, often utilized as a source of income for individuals in retirement.

Cash Payback Period

The length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment.