The Longer Money Can Earn Interest

question 46

Multiple Choice

The longer money can earn interest,

• A) the greater the interest earned on the original deposit exceeds the interest-on-interest.
• B) the greater the compounding effect.
• C) the greater the present value must be to reach a financial goal.
• D) the greater the risk to the investor of not reaching a financial goal.

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Definitions:

Direct Method

A method of presenting the cash flow statement where cash receipts and cash payments from operating activities are disclosed, offering a clearer understanding of cash flows.

Statement of Cash Flows

An account that illustrates the impact of variations in income and balance sheet positions on cash and similar assets.

Indirect Method

A method for presenting cash flow from operations that begins with net income and makes adjustments for transactions that do not involve cash.

Statement of Cash Flows

A financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents, analyzing a company’s financing, investing, and operating activities.