Which of the following is false concerning the payback method of capital budgeting?
A)It uses the accrual accounting rate of return.
B)The payback method highlights liquidity.
C)Its major strength is that it that it is easy to use.
D)It does not consider cash flows after the recovery of the initial investment.
E)Shorter payback periods give an organization more flexibility.

Question

Quizplus · Accepted Answer

The payback method does not use the accrual accounting rate of return. It calculates the amount of time it takes for an investment to recover its initial cost based on cash inflows.

Which of the Following Is False Concerning the Payback Method