If Interest Rates Are Forecast to Rise and a Company

question 20

Multiple Choice

If interest rates are forecast to rise and a company has achieved a positive ARBL this means:

• A) it is disadvantaged if interest rates rise.
• B) it can benefit in the short-term if interest rates increase.
• C) its profits may be adversely affected.
• D) it has a negative impact on its profit margins.

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Definitions:

Gross Amount

The gross amount is the total figure before any deductions are made, such as expenses, taxes, or discounts.

Journal Entries

Recorded transactions in the accounting journals that represent the financial activities of a company, detailing debits and credits for account adjustments.

Average Cost

A method of inventory valuation that calculates the cost of goods sold and ending inventory based on the weighted average cost of all items.

Cost Flow Assumption

An accounting principle that determines the method used to assign costs to inventory and to cost of goods sold, including FIFO, LIFO, and average cost methods.