Explanation

The discount rate is used in NPV calculations.

It reflecting the cost of capital, opportunity cost, or risk.

It is used to discount cash flows to their present value for a more accurate evaluation.

Explanation

NPV is often compared with IRR for project evaluation.

Because both methods assess a project's profitability.

But NPV measures the project's total value in today's dollars.

While IRR measures the project's rate of return.

Explanation

COGS (Cost of Goods Sold) is a direct cost associated with producing and selling a company's products or services.

It is listed on the income statement as a subtraction from revenue to calculate gross profit.

Explanation

LIFO (Last-In, First-Out) assumes that the newest inventory items (those purchased or produced most recently) are sold first.

This method is commonly used in industries where prices are rising or inventory is non-perishable.

Explanation

COGS (Cost of Goods Sold) is subtracted from Net Sales to determine Gross Profit. The formula is:

Gross Profit = Net Sales - COGS

Net Sales refers to the total revenue generated from sales, minus any returns, discounts, or allowances.

Explanation

NPV stands for Net Present Value.

NPV measures the value of cash flows over time.

It adjusted for the time value of money.

Explanation

Explanation

Simple interest is calculated on the principal only.

It does not include compounding.

Explanation

Gross profit is the difference between Revenue and Cost of Goods Sold (COGS).

It representing the profit earned from selling a product or service before considering other expenses.

It's calculated as: Gross Profit = Revenue - COGS.

Explanation

NPV calculation components:

• Initial investment (negative cash flow)
• Future cash inflows (positive cash flows)
• Discount rate (used to discount cash flows to their present value)

Depreciation expense is not a direct component of NPV calculation.

As it is already accounted for in the cash flows.