The Use of Reversing Entries

question 38

Multiple Choice

The use of reversing entries

• A)is a required step in the accounting cycle.
• B)changes the amounts reported in the financial statements.
• C)simplifies the recording of subsequent transactions.
• D)is required for all adjusting entries.

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Definitions:

IRR

The Internal Rate of Return; a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Capital Constraints

Limitations on the amount of capital a company or economy can obtain, often leading to restrictions on growth and investment.

NPV Analysis

Net Present Value Analysis, a method of evaluating the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds, encompassing debt and equity.