The Quality of Receivables Refers to the Likelihood of Collection

question 198

True/False

The quality of receivables refers to the likelihood of collection without loss.

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Definitions:

Profitability Index

A financial tool used to evaluate the desirability of an investment, calculated by dividing the present value of future cash flows by the initial investment.

Positive NPV

A scenario in which the net present value of a project's cash inflows exceeds its cash outflows, indicating profitability.

Negative NPV

A situation where the net present value (NPV) of a project or investment is less than zero, indicating that the projected cash flows are insufficient to cover the initial investment.

Discounted Payback Period

The discounted payback period is the time it takes for an investment to generate cash flows sufficient to recover its initial cost, taking the time value of money into account.