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

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following methods for evaluating a capital investment project use cash flows as the primary measurement basis?

Payback Period

Return on Equity (ROE)

Accounting Rate of Return (ARR)

Net Present Value (NPV)

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Verified step by step guidance

Understand the question: The problem is asking which methods for evaluating a capital investment project use cash flows as the primary measurement basis. The options provided are Payback Period, Return on Equity (ROE), Accounting Rate of Return (ARR), and Net Present Value (NPV).

Review the concept of cash flows: Cash flows refer to the actual inflows and outflows of cash in a business. Methods that rely on cash flows focus on the timing and magnitude of these cash movements rather than accounting profits.

Analyze each method: Payback Period evaluates how long it takes to recover the initial investment using cash flows, so it uses cash flows as the primary measurement basis. Return on Equity (ROE) and Accounting Rate of Return (ARR) are based on accounting profits, not cash flows. Net Present Value (NPV) calculates the present value of future cash flows, making it a cash flow-based method.

Identify the correct answer: Based on the analysis, the methods that use cash flows as the primary measurement basis are Payback Period and Net Present Value (NPV).

Conclude: The correct answer provided in the problem is Net Present Value (NPV), which is indeed a method that uses cash flows as the primary measurement basis. However, note that Payback Period also uses cash flows, even though it is not mentioned in the correct answer here.