Which one of the following methods of analysis ignores cash flows?
A)Profitability index
B)Net present value
C)Average accounting return
D)Modified internal rate of return
E)Internal rate of return

Question

Quizplus · Accepted Answer

The average accounting return is a method of analysis that only considers accounting measures, such as net income and book value of assets, but ignores cash flows. The other methods listed, such as profitability index, net present value, and internal rate of return, all take into account the timing and amount of cash flows in their calculations. Modified internal rate of return also considers cash flows but adjusts for potential reinvestment assumptions.

Which One of the Following Methods of Analysis Ignores Cash