Which of the Following Statements Is False

question 41

Multiple Choice

Which of the following statements is false?

• A) Because interest rates may be quoted for different time intervals, it is often necessary to adjust the interest rate to a time period that matches that of our cash flows.
• B) The effective annual rate indicates the amount of interest that will be earned at the end of one year.
• C) The annual percentage rate indicates the amount of simple interest earned in one year.
• D) The annual percentage rate indicates the amount of interest including the effect of compounding.

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Definitions:

Cash Basis

An accounting method where revenues and expenses are recorded when cash is received or paid, rather than when they are incurred.

Statement of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.

Operating Activities

Business activities related directly to the production, sale, and delivery of a company's products or services, which are reflected in the cash flows from operating activities in the statement of cash flows.

Net Cash

The amount of cash remaining after all operating expenses, investments, and financial activities have been accounted for.