Costs That Are Incurred to Obtain Future Benefits Beyond 12

question 20

Multiple Choice

Costs that are incurred to obtain future benefits beyond 12 months are known as:

• A) assets.
• B) liabilities.
• C) revenue.
• D) expenses.

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Definitions:

Net Present Value

The difference between the present value of an investment project’s cash inflows and the present value of its cash outflows.

Discount Rate

The interest rate used to discount future cash flows to present value, often reflecting the cost of capital or risk level.

Payback Method

A method of investment appraisal that calculates the time required for the cash inflows from a project to repay its initial investment.

Cash Flows

The total amount of money being transferred into and out of a business, affecting the company's liquidity.