If Liabilities Increase $120,000 During a Given Period and Shareholders

question 33

Multiple Choice

If liabilities increase $120,000 during a given period and shareholders' equity decreases $25,000 during the same period, assets must:

• A) decrease $95,000
• B) increase $95,000
• C) decrease $145,000
• D) increase $145,000

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Definitions:

Present Value Factor

A calculation used in determining the present value of a sum of money to be received in the future by considering a specified rate of interest.

Average Rate of Return

A financial ratio that indicates the profitability of an investment by calculating the average annual profits divided by the initial investment cost.

Present Value Factor

A factor used to determine the present value of a sum that is to be received in the future, taking into account a specific interest rate and time period.

Cash Payback Period

The amount of time it takes for an investment to generate enough cash flow to recover its initial cost.