The Main Difference Between M1 and M2 Is That

question 47

Multiple Choice

The main difference between M1 and M2 is that:

• A) M1 includes some less liquid assets in addition to the assets in M2.
• B) M1 includes more liquid assets in addition to the assets in M2.
• C) M2 includes some less liquid assets in addition to the assets in M1.
• D) M2 includes more liquid assets in addition to the assets in M1.

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Definitions:

Capital Budgeting

The process by which organizations evaluate potential long-term investments or projects in terms of their cost and potential benefits to determine which will provide the most value.

Terminal Values

estimate the value of an investment, business, or project beyond the forecast period when future cash flows can be estimated.

Future Value Formulas

Mathematical equations used to calculate the amount of money an investment will grow to at a future date.

Cash Flows

The overall volume of funds moving into and exiting a firm, which is crucial for its liquidity status.