The Payback Method Assumes That the Cash flOws

question 313

Multiple Choice

The payback method assumes that the cash flows:

• A) Are an annuity stream.
• B) Occur evenly throughout the year.
• C) Occur at the end of the year.
• D) Are discounted at the IRR rate.
• E) Are calculated with the consideration of the time value of money.

---

Definitions:

Operating Activity

Activities that relate directly to the primary business operations of a company, such as sales and service revenues and associated costs.

Financing Activities

Activities that result in changes in the size and composition of the equity capital and borrowings of the entity.

IFRS

International Financial Reporting Standards are a set of accounting standards developed by the International Accounting Standards Board (IASB) to guide companies and organizations in preparing financial statements globally.

Direct Method

A cash flow statement presentation that lists major classes of gross cash receipts and payments, giving a clear view of actual cash flows.