Financial Management - Study Mode

[#556] Business owned by a single person in unincorporated way is called
Correct Answer

(A) proprietorship

Explanation

Solution: Business owned by a single person in unincorporated way and self controlled is called proprietorship. A sole proprietorship, also known as the sole trader, individual entrepreneurship or proprietorship, is a type of enterprise that is owned and run or managed by single person and in which there is no legal distinction between the owner and the business entity.

[#557] An uncovered cost at 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

Explanation

Solution: An uncovered cost at start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating payback period. The payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, the payback period is the length of time an investment reaches a breakeven point.

[#558] In cash flow analysis, two projects are compared by using common life is classified as
Correct Answer

(D) Both B and C

Explanation

Solution: In cash flow analysis, two projects are compared by using common life is classified as replacement chain approach and common life approach.

[#559] Other factors held constant, but lesser project liquidity is because of
Correct Answer

(B) greater payback period

Explanation

Solution: Other factors held constant, but lesser project liquidity is because of greater payback period. Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point.

[#560] In capital budgeting, an internal rate of return of project is classified as its
Correct Answer

(B) internal rate of return

Explanation

Solution: In capital budgeting, an internal rate of return of project is classified as its internal rate of return. Internal rate of return (IRR) is the interest rate at which the NPV of all the cash flows (both positive and negative) from a project or an investment equals zero.