The Net Present Value Method Takes the Time Value of Money

question 32

True/False

The net present value method takes the time value of money into account in evaluating an investment.

---

Definitions:

Net Operating Income

The profit generated from a company's core business operations after deducting all operating expenses except for interest and taxes.

Degree Of Operating Leverage

A financial metric that measures the sensitivity of a company's operating income to its sales. Higher leverage indicates that a small change in sales can lead to a large change in operating income.

Contribution Format

A method of income statement presentation that separates variable costs from fixed costs, highlighting the contribution margin.

Sales Mix

The proportion of different products or services that comprise the total sales of a company, affecting overall profitability.