The Present Value Concept Is Widely Applied in Business Because

question 7

Multiple Choice

The present value concept is widely applied in business because:

• A)inflation erodes the purchasing power of money.
• B)money has value over time.
• C)long-term operating assets depreciate over time.
• D)most obligations are settled within a year.

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Definitions:

Spontaneous Financing

Financing that occurs automatically as a firm's operating activities increase, such as trade credit.

Trade Payables

Amounts owed by a company to its suppliers or vendors for goods and services received but not yet paid for.

Revolving Credit Agreement

A credit arrangement that allows a borrower to withdraw, repay, and re-borrow funds up to a specified limit over a set period.

Agreed Limit

An agreed limit refers to a predetermined maximum amount that an insurance company agrees to pay out for a specific claim or coverage.