Which of the following statements about capital budgeting practices in small firms is true?
A) A large number of owners rely on discounted cash flow (DCF) techniques.
B) Small business owners are not very sophisticated about using theoretically sound financial methods.
C) In the past, most small business owners relied on the internal rate of return (IRR) method to make capital budgeting decisions.
D) Most small business owners today are unwilling to learn how to use discounted cash flow (DCF) tools.

Question

Quizplus · Accepted Answer

Studies have shown that small business owners are less likely to use theoretically sound financial methods such as discounted cash flow (DCF) and more likely to use less sophisticated methods such as the payback period or gut instinct. This is likely due to the lack of resources and expertise in financial management in small firms.

Which of the Following Statements About Capital Budgeting Practices in Small