Which of the Following Is a True Statement About the Use

question 32

Multiple Choice

Which of the following is a true statement about the use of the payback period technique in capital budgeting?

• A) It is simple to use and understand.
• B) It considers the time value of money.
• C) It is not possible to appraise risk with this technique.
• D) It is mainly used to measure profitability of a project.

---

Definitions:

Investing Activities

Financial transactions involving the purchase and sale of long-term assets and other investments not included in cash equivalents.

Cash Flow Statement

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Statement of Cash Flows

This document details the combined amount of cash a business gains from its day-to-day operations and outside investments, and the cash it expends on operating and investing activities over a particular period.

Indirect Method

A method of calculating cash flows from operating activities in the cash flow statement by adjusting net income for changes in non-cash accounts.