Which of the Following Is FALSE About the Payback Period

question 107

Multiple Choice

Which of the following is FALSE about the payback period?

• A) It is used as an informal measure of project risk.
• B) It is evaluated by choosing an arbitrary cut-off date.
• C) It rejects projects whose payback period is shorter than the cut-off period.
• D) It disregards the time and risk value of money.

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Definitions:

Operating Activities Section

Part of a cash flow statement that shows the cash generated or used by a company’s core business operations.

Equipment Sold

Refers to assets that were once part of a company’s operational resources but have been disposed of in exchange for cash or other assets.

Accounts Receivable

Amounts owed to a company by customers for goods or services that have been delivered or used but not yet paid for.

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.