The Concept of Time Value of Money Is Important to Financial

question 49

Multiple Choice

The concept of time value of money is important to financial decision making because

• A)it emphasizes earning a return on invested capital.
• B)it recognizes that earning a return makes $1 worth more today than $1 received in the future.
• C)it can be applied to future cash flows in order to compare different streams of income.
• D)All of these options

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Definitions:

Annual Accounting Period

A 12-month time span used by businesses for financial reporting and accounting purposes.

Chart of Accounts

A systematic listing of all ledger account names and numbers used by a company, organized by the assets, liabilities, equity, revenue, and expenses.

Closing Entry

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts and prepare the company's books for the next period.

Debit and Credit

Fundamental concepts in double-entry bookkeeping, where debits are entries on the left side of an account and credits are entries on the right.