Matching Definitions

(41) What is the definition of “Net Present Value (NPV)” in financial analysis?

• (a) The difference between the present value of cash inflows and outflows over a specific time period, considering the time value of money.
• (b) The total assets owned by an individual or company.
• (c) The process of selling a company’s assets.
• (d) The calculation of a company’s net income.

Answer

Correct Answer: (a) The difference between the present value of cash inflows and outflows over a specific time period, considering the time value of money.
Net Present Value (NPV) in financial analysis represents the difference between the present value of cash inflows and outflows over a specific time period, considering the time value of money, to determine the profitability of an investment or project.

(42) What does the term “Diversification” mean in investment strategy?

• (a) Spreading investments across a variety of assets to reduce risk by avoiding over-reliance on a single asset or asset class.
• (b) The total revenue generated by a company.
• (c) The process of merging two or more companies.
• (d) The calculation of a company’s net worth.

Answer

Correct Answer: (a) Spreading investments across a variety of assets to reduce risk by avoiding over-reliance on a single asset or asset class.
Diversification in investment strategy refers to the practice of spreading investments across a variety of assets to reduce risk by avoiding over-reliance on a single asset or asset class.

(43) What is the definition of “Stakeholder” in the context of business and corporate governance?

• (a) An individual, group, or entity that has an interest, stake, or concern in the activities and outcomes of a business or organization.
• (b) The total revenue generated by a company.
• (c) The process of selling a company’s assets.
• (d) The calculation of a company’s net worth.

Answer

Correct Answer: (a) An individual, group, or entity that has an interest, stake, or concern in the activities and outcomes of a business or organization.
A Stakeholder in the context of business and corporate governance refers to an individual, group, or entity that has an interest, stake, or concern in the activities and outcomes of a business or organization and can influence or be influenced by the organization.

(44) What does the term “Cash Flow Statement” represent in financial reporting?

• (a) A financial statement that provides a summary of a company’s cash inflows and outflows during a specific period.
• (b) The total revenue generated by a company.
• (c) The process of selling a company’s assets.
• (d) The calculation of a company’s net worth.

Answer

Correct Answer: (a) A financial statement that provides a summary of a company’s cash inflows and outflows during a specific period.
A Cash Flow Statement in financial reporting provides a summary of a company’s cash inflows and outflows during a specific period, offering insights into its liquidity and cash management.

(45) What is the definition of “Initial Public Offering (IPO)” in finance?

• (a) The process by which a private company offers its shares to the public for the first time, raising capital by becoming a publicly traded company.
• (b) The total revenue generated by a company.
• (c) The process of merging two or more companies.
• (d) The calculation of a company’s net worth.

Answer

Correct Answer: (a) The process by which a private company offers its shares to the public for the first time, raising capital by becoming a publicly traded company.
An Initial Public Offering (IPO) in finance represents the process by which a private company offers its shares to the public for the first time, raising capital by becoming a publicly traded company.