The Payback Period

question 39

Multiple Choice

The payback period:

• A)Is the length of time necessary to recover the entire cost of an investment from its resulting annual net cash flow.
• B)Is the length of time necessary to recover the entire cost of an investment from its resulting annual net income.
• C)Takes into consideration the profitability of an investment over its entire life,but ignores the timing of its future cash flows.
• D)Takes into consideration both the profitability of an investment over its entire life and the timing of its future cash flows.

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Definitions:

Risk Management

The process of identifying, assessing, and prioritizing risks followed by the application of resources to minimize or control the impact of such risks.

Traceable Costs

Traceable costs are specific expenses that can be directly linked to a particular cost object, such as a product, department, or project.

Period Costs

Expenses that are not directly tied to product production and are expensed in the accounting period in which they are incurred.

Held For Sale

A classification for assets on the balance sheet intended to be sold within a short period, usually one year.