Which of the Following Is Not True Regarding Promissory Notes

question 2

Multiple Choice

Which of the following is not true regarding promissory notes?

• A)Promissory notes are not shown at net realizable value on the statement of financial position.
• B)Promissory notes are usually interest-bearing.
• C)Promissory notes give a stronger legal claim to the holder than accounts receivable.
• D)Promissory notes are frequently accepted from customers who need to extend the payment of an outstanding account receivable.

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Definitions:

Time Value of Money

The concept that money available now is worth more than the same amount in the future due to its earning capacity.

Discounted Payback Method

A capital budgeting approach that calculates the time required to recoup the cost of an investment, considering the time value of money.

Internal Rate of Return (IRR)

The interest rate that results in a net present value of zero for all cash flows associated with a specific project.

Net Present Value (NPV)

A financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time. It is used to assess the profitability of an investment.