The Operating Cycle Is the Time Span Required for a Business

question 96

True/False

The operating cycle is the time span required for a business to repay its long-term liabilities.

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Definitions:

Nominal Rate

The interest rate stated on a loan or investment agreement, not taking into account the effects of inflation, and often differing from the real rate of interest.

Compounded Semi-annually

An interest calculation method where interest is added to the principal sum of a deposit or loan twice a year, leading to compound interest.

Effective Rate

The effective rate, also known as the annual equivalent rate, is the interest rate on an investment or loan that accounts for the effects of compounding over a given period.

APR

Annual Percentage Rate, which is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, credit card, etc.