Which of the Following Is the Rate of Return, Based

question 138

Multiple Choice

Which of the following is the rate of return, based on discounted cash flows, that a company can expect to earn by investing in a capital asset?

• A) Rate of return
• B) Net present value (NPV)
• C) Internal rate of return (IRR)
• D) Payback period

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Definitions:

Fiscal Year

The one-year period an organization uses for accounting purposes and preparing financial statements, which may or may not align with the calendar year.

Revenue Recognition Principle

A fundamental accounting principle that dictates when revenue should be recognized in the financial statements, typically when it is earned and realizable.

Prepaid Expenses

Funds disbursed before receiving goods or services, documented as assets until they are utilized or consumed.

Expense Recognition Principle

An accounting principle that matches expenses with revenues in the period in which they're incurred to produce those revenues.