Which of the Following Is Not a Characteristic of the Payback

question 109

Multiple Choice

Which of the following is not a characteristic of the payback method for making capital budgeting decisions?

• A) It is easy to calculate and comprehend.
• B) It focuses primarily on liquidity, rather than profitability, of an investment project.
• C) It can be considered a rough measure of risk.
• D) It considers returns over the entire life of the project.
• E) It requires estimates of after-tax cash inflows and after-tax cash outflows.

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Definitions:

Uniform Commercial Code

A comprehensive set of laws governing all commercial transactions in the United States, intended to standardize and simplify the law relating to commerce.

Negotiable Instruments

Financial documents that guarantee the payment of a specific amount of money, either on-demand or at a set time, with examples including checks, promissory notes, and drafts.

IOU

An informal written document that acknowledges a debt owed.

Handwritten

Refers to text that has been written by hand, as opposed to being printed or digitally produced.