1. Business
2. Finance
3. Capital Budgeting
4. Capital Budgeting Ratios
5. Payback Period and Discounted Payback Period
6. 262419

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Which of the following is not a profitability ratio?

a. revenues minus expenses divided by net assets

b. operating revenue divided by revenue less expenses

c. total increase in net assets divided by total revenue

d. return on assets

Answer: C

Project A costs $10,000 and returns $3,000 a year for 3 years. Project B costs $15,000 and returns $5,000 a year for 2 years. Which one of the following is correct?

a. Payback period for Project A is 3 years.

b. Both projects should be undertaken.

c. Neither project should be undertaken.

d. Payback period for Project B is 3 years.