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

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Why is the payback method often used as the sole method of analyzing a proposed small project?

Because it always provides the most accurate measure of a project's profitability.

Because it is simple to calculate and understand, making it suitable for small projects with limited resources.

Because it is required by generally accepted accounting principles (GAAP) for all small projects.

Because it takes into account the time value of money and all future cash flows.

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Verified step by step guidance

Understand the payback method: The payback method is a capital budgeting technique that calculates the time required for an investment to recover its initial cost through cash inflows. It is widely used for small projects due to its simplicity.

Evaluate the simplicity of the method: The payback method is straightforward to calculate and does not require complex financial analysis, making it accessible for small projects with limited resources or expertise.

Consider the limitations: The payback method does not account for the time value of money or cash flows beyond the payback period, which can limit its accuracy in assessing long-term profitability.

Compare with other methods: Unlike methods such as Net Present Value (NPV) or Internal Rate of Return (IRR), the payback method is not required by GAAP and does not incorporate all future cash flows or the time value of money.

Conclude why it is used: The payback method is often chosen for small projects because it is simple to calculate and understand, making it a practical choice for organizations with limited resources or for projects where detailed analysis is not necessary.