All of the following are weaknesses of the payback period EXCEPT
A) a disregard for cash flows after the payback period.
B) the difficulty of specifying the appropriate payback period.
C) only an implicit consideration of the timing of cash flows.
D) it uses cash flows, not accounting profits.

Question

Quizplus · Accepted Answer

This statement does not identify a weakness of the payback period. In fact, the use of cash flows instead of accounting profits is often seen as a strength, as accounting profits can be manipulated by non-cash items such as depreciation. The weaknesses of the payback period are A, B, and C, which are all related to its limited ability to account for the time value of money and the longer-term profitability of an investment.

All of the Following Are Weaknesses of the Payback Period