Which of the Following Techniques Is Most Useful for a Special

question 20

Multiple Choice

Which of the following techniques is most useful for a special order decision?

• A)Payback method
• B)Present value method
• C)Accounting rate-of-return method
• D)Incremental analysis

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Definitions:

Forward Contracts

Financial derivatives contracts between two parties to buy or sell an asset at a specified future date for a price agreed upon today.

Option Contracts

Financial derivatives that give the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a certain date.

Financial Liabilities

Obligations that require an entity to pay money or deliver financial assets to another party in the future, which can arise from borrowing, purchasing goods or services on credit, or issuing bonds.

Bank Overdraft

A facility allowing an entity to withdraw more money from a bank account than has been deposited, within a previously agreed limit.