Hahha

What defines investment appraisal?

It assesses expected returns against expenditures.

What is ROCE?

It measures the efficiency of capital used in generating profits.

How does payback period differ from ROCE?

Payback focuses on liquidity, while ROCE assesses profitability.

What happens if cash flows are not considered in investment appraisal?

It may lead to inaccurate assessments of project viability.

What are relevant cash flows?

They include future, incremental, and cash-based flows.

What is the payback method?

It calculates the time needed to recover initial investment.

What is a disadvantage of the payback method?

It ignores cash flows after the payback period.

What defines a relevant cash flow in investment appraisal?

It must be a future cash flow directly tied to the project.

What is the implication of using accounting profits over cash flows?

Accounting profits can be subjective and not spendable.

What is a key advantage of ROCE?

It links to other accounting measures for better analysis.

What does CIttake into account?

Cash flows after the payback period.

How does D function in project evaluation?

It screens out inappropriate projects early.

Which statement about return on capital employed is false?

It does not consider project length.

What is the effect of focusing on an early payback period?

It can improve liquidity.

How does investment risk relate to payback period?

Longer payback periods increase risk.

Why are shorter term forecasts considered more reliable?

They are based on less uncertain data.