An uncovered cost at the start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating ____________?
Correct answer: C. payback period
- A. original period
- B. investment period
- C. payback period
- D. forecasted period
Explanation
The payback period equals the number of complete years before recovery plus the unrecovered amount at the start of the recovery year divided by that year's cash flow. This formula identifies the point at which the initial investment is fully recovered.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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