Which of the Following Is a Drawback of the Payback

question 62

Multiple Choice

Which of the following is a drawback of the payback period?

• A) It ignores a project's total profitability.
• B) It uses a set discount rate.
• C) It considers total profitability, requiring the forecasting of all future cash flows.
• D) It uses before-tax cash flows rather than after-tax cash flows.
• E) It uses operating income rather than cash flows.

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Definitions:

Direct Materials Purchases

The total cost of raw materials bought that are directly incorporated into a finished product.

Ending Direct Materials

Ending Direct Materials refers to the value of raw materials that are still available for use in production at the end of an accounting period.

Required Production

Required production is the quantity of goods a company needs to produce in a given period to meet customer demand and maintain inventory levels.

Direct Labor

Labor costs directly associated with the manufacture of products or provision of services, such as wages for assembly line workers.