Which of the Following Does Not Correctly Describe the Effect

question 101

Multiple Choice

Which of the following does not correctly describe the effect of a credit card discount?

• A)Net sales decrease and gross profit decreases.
• B)Net sales decrease and net income decreases.
• C)Operating expenses remain the same and net income decreases.
• D)Neither operating expenses, nor net income is affecteD.The credit card discount account is a contra-revenue account, which reduces net sales, gross profit, and therefore net income.

Recognize the distinction between stocks and bonds as long-term investment vehicles.

Differentiate between money markets and capital markets.

Explain financial intermediation and its impact on investors.

Identify the role of the Securities and Exchange Commission (SEC) and its importance in the financial markets.

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Definitions:

Profitability Index

A financial metric used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment.

Discount Rate

The discount rate utilized in determining the present value of future cash flows through discounted cash flow (DCF) analysis.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment by calculating the present value of expected cash flows minus the initial cost.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.