Business Finance Quiz

What is capital budgeting generally known as?

• Investment appraisal

• Financial forecasting

• Cost analysis

• Revenue management

Which of the following is NOT a feature of investment decisions?

• Involves large amounts of funds

• Future benefits occur over years

• Funds are invested in short-term assets

• Involves exchange of funds

What type of projects are capital projects?

• Short-term projects

• Projects affecting operations beyond one financial period

• Projects with no financial implications

• Projects with immediate returns

What is the first step in evaluating an investment?

• Estimation of cash flows

• Application of decision rule

• Review of past investments

• Estimation of required rate of return

What should be ignored when estimating cash flows?

• Working capital adjustments

• Sunk costs

• Incremental cash flows

• Future cash flows

What does NPV stand for?

• Net Profit Variance

• Net Payment Value

• Net Profit Value

• Net Present Value

Which method considers the time value of money?

• Simple interest

• Accounting rate of return

• Payback period

• Net Present Value

What is the acceptance rule for NPV?

• Accept if NPV = 1

• Accept if NPV > 0

• Accept if NPV = 0

• Accept if NPV < 0

What does IRR stand for?

• Incremental Rate of Return

• Interest Rate of Return

• Investment Rate of Return

• Internal Rate of Return

What is the formula for calculating payback period?

• Payback = Annual cash flows / Initial investment

• Payback = Initial investment + Annual cash flows

• Payback = Initial investment / Annual cash flows

• Payback = Total cash flows / Number of years