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Which of the Following Statements Is Correct

question 21

Multiple Choice

Which of the following statements is correct?


Definitions:

Capital Budgeting

The process by which investors determine the value of potential investments or projects by assessing the cash inflows and outflows associated with them.

Conventional Cash Flows

A series of inward and outward cash flows over time where there is typically one initial outflow followed by several inflowing cash amounts.

Profitability Index

The Profitability Index is a financial metric that compares the present value of future cash flows generated by a project to the initial investment, used to assess the attractiveness of an investment.

Average Accounting Return

A method of measuring an investment's profitability by comparing its average net income to its average book value.

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