The Ratio of Interest to Principal Repayment on an Amortizing

question 57

Multiple Choice

The ratio of interest to principal repayment on an amortizing loan

• A) increases as the loan gets older.
• B) decreases as the loan gets older.
• C) remains constant over the life of the loan.
• D) changes according to the level of market interest rates during the life of the loan.

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Definitions:

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, dividing activities into operating, investing, and financing activities.

Cash Flow

Cash flow refers to the net amount of cash and cash-equivalents being transferred into and out of a business, illustrating the company's financial health and operational efficiency.

Operations

The day-to-day activities and processes conducted by a business to generate value and serve its customers effectively.

Asset Turnover Ratio

A measure of how efficiently a company uses its assets to generate sales revenue.