A Firm May Choose a Project with a Rapid Payback

question 2

Multiple Choice

A firm may choose a project with a rapid payback period rather than one with a larger net present value because:

• A)it may have a poor cash position and limited access to outside finance.
• B)no reason is necessary,as it would never happen.
• C)the payback period is a superior means of evaluating projects.
• D)the required rate of return may not be readily determinable.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount available to cover fixed costs and contribute to profits.

Reporting

The process of preparing and presenting data and information, usually financial, to stakeholders to inform them of the organization's status or performance.

Expenses Grouping

The practice of categorizing costs and expenses into distinct groups to simplify financial analysis and reporting.

Organisation Functions

The primary activities and responsibilities that are crucial for the successful operation of a business or organization.