Payback Is Frequently Used to Analyze Independent Projects Because

question 87

Multiple Choice

Payback is frequently used to analyze independent projects because:

• A)it considers the time value of money.
• B)all relevant cash flows are included in the analysis.
• C)it is easy and quick to calculate.
• D)it is the most desirable of all the available analytical methods from a financial perspective.
• E)it produces better decisions than those made using either NPV or IRR.

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Definitions:

Current Liabilities

A company's debts or obligations that are due to be paid to creditors within one year.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity of the company.

Current Ratio

An indicator assessing a corporation's capability to settle its obligations that are due in less than one year, focusing on short-term liquidity.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets.