Business Finance Reviewer

Which of the following statements correctly defines an income statement?

• 1. A financial statement that provides information on a company's financial position at a specific point in time.

• 1. A financial statement that shows a company's revenues, expenses, and net income over a specific period.

• 1. A projection of a company's assets, liabilities, and equity for a future period.

• 1. A summary of a company's cash flows, including operating, investing, and financing activities. 

• 1. A report of a company's historical financial performance in a given year.

When comparing two investment options, which one is more desirable in terms of the time value of money?

• An investment that offers a lower rate of return.

• An investment that pays out its returns sooner.

• An investment with a longer holding period.

• An investment with uncertain returns.

• Depending on your risk appetite

In the context of the time value of money, what does "discounting" refer to?

• Reducing the value of future cash flows to their present value.

• Increasing the value of present cash flows to their future value.

• Calculating the average return on an investment.

• Compounding interest over multiple periods.

• Giving discounts to the investment

Which of the following is an application of simple interest?

• Earnings on a savings account with monthly compounding

• Credit card interest with compounding

• Dividend earnings on stock investments

• Mortgage payments on a fixed-rate loan

• 5-6 Lending

Which of the following statements about compound interest is true?

• Compound interest is always lower than simple interest.

• Compound interest is only calculated annually.

• Compound interest calculations ignore the effect of time.

• Compound interest makes you richer if you are the creditor.

• Compound interest can result in exponential growth of an investment.

Which of the following factors has the greatest impact on the present value of future cash flows?

• The frequency of compounding

• The future value

• The present value

• The discount rate

• The time period

 When calculating the present value of future cash flows, what happens as the rate increases?

• Present value increases

• Present value decreases

• Future value increases

• Future value decreases

• No changes

How does increasing the time period affect the future value of an investment, assuming a fixed interest rate?

• It has no effect on the future value.

•  It decreases the future value.

• It increases the future value.

• It only affects the present value.

• It increases the present value.

In the context of the time value of money, what does "amortization payment" refer to?

• The process of calculating future value

• A series of equal payments or receipts made at regular intervals

• The initial investment amount

• The effect of inflation on cash flows

• The growth of the loan

A Philippine retail company is planning its sales budget for the next year. They want to expand their operations by opening new stores in different provinces. Which of the following factors should the company consider when estimating sales revenue?

• Historical sales data of existing stores

• Sales tax rates in different provinces

• Competitor's pricing strategies

• The exchange rate of the peso against the US dollar

• The inflation rate