A Company Borrows $10,000 from the Bank at 10% Interest

question 79

Multiple Choice

A company borrows $10,000 from the bank at 10% interest for sixty days.$10,000 is the ________ of the note.The maturity value of the note is ________.

• A)maturity value; 10,164
• B)present value; 10,000
• C)future value; 10,000
• D)principal; $10,164

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Definitions:

Fixed Assets

Long-term tangible assets that are used in the operations of a business and not expected to be converted into cash in the short term, like buildings, machinery, and land.

Tax Shield Approach

A method of reducing taxable income through allowable deductions such as depreciation, resulting in lower tax payments.

Operating Cash Flow

The cash generated from normal business operations, indicating a company's ability to generate sufficient revenue to maintain and grow its operations.

EBIT

A financial performance measurement called Earnings Before Interest and Taxes, which disregards interest and income tax outlays to assess a company's profitability.