Compound Interest Is Best Defined as the Interest Earned

question 119

Multiple Choice

Compound interest is best defined as the interest earned:

• A) On prior year'sinterest which was reinvested.
• B) On a simple basis for multiple years.
• C) On the initial investment for a stated number of periods.
• D) On both the interest reinvested from prior periods and the initial investment.
• E) For the first year multiplied by the number of years in the investment period.

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Definitions:

Turnover

The rate at which inventory or assets are replaced over a given period, or alternatively, the total amount of a company's sales or revenues.

Net Operating Income

The total profit of a company after operating expenses are subtracted, but before taxes and interest are deducted.

Average Operating Assets

The average value of the assets involved or used in the operating activities of a company over a given period, typically calculated as the average of the opening and closing balances of these assets.

Residual Income

Earnings that exceed the minimum required return on investment; it's what remains after all costs and expenses have been deducted.