Items That Reduce the Net Income of a Firm, but Do

question 105

Multiple Choice

Items that reduce the net income of a firm, but do not affect the firms' cash flows are called _________ item.

• A) expense
• B) intangible
• C) noncash
• D) paid-in
• E) financing

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Definitions:

Compounded semi-annually

The method of computing interest by taking into account both the original amount of money deposited or lent and the interest that has been earned on that amount from past periods, with the calculation occurring semi-annually.

Perpetuity

A financial instrument that provides endless payments of a fixed amount of money, often used to model the value of stable companies.

Semi-annually

Occurring twice a year, or every six months.

Compounded

The method of calculating interest where the accumulated interest is added back to the principal sum, so that interest in the next period is then earned on the principal plus previously accumulated interest.