Which of the Following Statements Is False

question 50

Multiple Choice

Which of the following statements is false?

• A) Purchase of equipment is an investing cash outflow.
• B) Sale of equipment creates investing cash outflow equal to its selling price.
• C) Purchase of short-term investments is an investing cash outflow.
• D) Purchase of a patent is an investing cash outflow.

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Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of shareholder wealth maximization.

Accounting Rate of Return

This measures the return on investment by dividing the average annual profit by the initial investment cost, often used for evaluating the profitability of potential investments.

Payback Period

The amount of time it takes for an investment to generate cash flows sufficient to recoup the initial investment cost.

Straight-Line Depreciation

Straight-Line Depreciation is a method of allocating the cost of a tangible asset over its useful life in equal annual amounts, reflecting a constant rate of depreciation.