A Good Rule of Thumb Is to Limit Installment Payments

question 27

Multiple Choice

A good rule of thumb is to limit installment payments to ____________ percent of your net monthly income.

• A)8
• B)20
• C)25
• D)10
• E)30

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Definitions:

Accounting Depreciation

The systematic allocation of the cost of a tangible asset over its useful life for financial reporting purposes.

Replacement Cost

Cost to replace a firm’s assets. Also called reproduction cost.

Economic Income

The sum of a company's net cash flow and the change in present value of a company's cash flows in a given period.

ROA

Return on Assets, a financial ratio indicating the profitability of a company relative to its total assets.