How Is Annual Cash Inflow Determined

question 31

Multiple Choice

How is annual cash inflow determined?

• A) Depreciation is subtracted from net income because it is an expense.
• B) Depreciation is added back to net income because it is not an outflow of cash.
• C) Depreciation is subtracted from net income because it is an outflow of cash.
• D) Depreciation is added back to net income because it is an inflow of cash.

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Definitions:

Equivalent Cash Value

The cash amount equivalent to the value of a non-cash item, often used in contexts like insurance settlements or lottery winnings.

Monthly Payment

The specific amount of money paid each month, typically in the context of loans or leases.

Compounded Semi-annually

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, applied twice a year.

Amortization Period

Refers to the total time taken to pay off a debt in regular installments until the loan amount and interest are paid in full.