Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following is an advantage of the cash payback method when evaluating investments in securities?

It is simple to compute and easy to understand.

It considers the time value of money.

It measures profitability over the entire life of the investment.

It requires detailed future cash flow projections.

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Verified step by step guidance

Understand the cash payback method: The cash payback method is a technique used to evaluate investments by determining the time it takes for the initial investment to be recovered through cash inflows. It is often used for its simplicity and ease of computation.

Analyze the advantages of the cash payback method: The method is straightforward to compute and easy to understand, making it accessible for decision-making without requiring complex calculations.

Consider the limitations of the cash payback method: Unlike methods such as Net Present Value (NPV), the cash payback method does not account for the time value of money, which is a critical factor in financial decision-making.

Evaluate profitability over the investment's life: The cash payback method focuses only on the period required to recover the initial investment and does not measure profitability over the entire life of the investment.

Assess the need for detailed cash flow projections: The cash payback method does not require detailed future cash flow projections, as it only considers the cash inflows until the initial investment is recovered.