Major Weaknesses of the Payback Method Do NOT Include Which

question 124

Multiple Choice

Major weaknesses of the payback method do NOT include which of the following?

• A) It does not measure profitability.
• B) It ignores the time value of money.
• C) It ignores cash flows beyond the payback period.
• D) It cannot be used as a rough estimate of the riskiness of a project.

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Definitions:

Variable Cost

Expenses that change in proportion to the activity or volume of a business, such as raw materials and labor costs directly tied to production levels.

Average Variable Cost

This is the average amount of variable costs (costs that change with production levels) per unit produced.

Net Profits

The actual profit after working expenses not included in the calculation of gross profit have been paid.

Production Quantity

The total volume or number of units of a product made by a company or industry.