Which of the Following Is NOT a Limitation of the Payback

question 122

Multiple Choice

Which of the following is NOT a limitation of the payback rule?

• A) It does not consider the time value of money.
• B) Lacks a decision criterion that is economically based.
• C) It is difficult to calculate.
• D) It does not consider cash flows occurring after the payback period.

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Definitions:

Debt Ratio

A financial ratio that compares the amount of a company’s total debt to its total assets, indicating the leverage level.

Assets

Resources owned by a company or individual considered valuable and can be used to produce positive economic value.

Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership interest of shareholders.

Note Payable

An obligation in the form of a promissory note, which requires the borrower to pay back the loan or debt to the lender at a future date.