Which of the Following Is False Concerning the Payback Method

question 193

Multiple Choice

Which of the following is false concerning the payback method of capital budgeting?

• A)It uses the accrual accounting rate of return.
• B)The payback method highlights liquidity.
• C)Its major strength is that it that it is easy to use.
• D)It does not consider cash flows after the recovery of the initial investment.
• E)Shorter payback periods give an organization more flexibility.

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Definitions:

Households

Economic units consisting of all persons who occupy a dwelling, which make decisions on consumption, savings, and investments.

Firms

Business organizations that use resources to produce goods or services for sale with the aim of making a profit.

Transfer Payments

Payments made by the government to individuals, without any expectation of a direct return or exchange of goods or services.

GDP

Gross Domestic Product; a measure of the economic performance of a country, representing the total value of all goods and services produced over a specific time period.