The Speed at Which Abnormal Net Income Falls to Zero

question 38

Multiple Choice

The speed at which abnormal net income falls to zero is called

• A)the balance sheet exposure.
• B)the depreciation rate.
• C)the decay rate.
• D)the exchange rate.

---

Definitions:

Operating Cash Flow

The amount of cash generated by a company’s normal business operations, indicating whether a company is able to generate sufficient positive cash flow.

Top-Down Approach

An investment strategy that begins with analyzing macroeconomic factors, then drilling down to the industries and finally individual companies to make investment decisions.

Net Initial Investment

The total upfront cost required to initiate an investment, including all relevant expenses minus any cash inflows.

Sunk Costs

Denotes expenses that have already been incurred and cannot be recovered.