Explanation

IRR is ideal for projects with varying cash flows.

As it considers the timing and amount of cash inflows and outflows.

It providing a comprehensive picture of profitability.

Explanation

A negative IRR indicates that a Project is not profitable.

It means that the project's expected returns are less than the cost of capital, resulting in a financial loss.

This suggests that investing in the project may not be a viable or attractive option.

Explanation

A Perpetual inventory system continuously updates inventory records in real-time, tracking inventory levels and costs as transactions occur.

This system provides a continuous and up-to-date record of inventory levels.

It allowing for accurate tracking and management of inventory.

Explanation

When ending inventory is overstated, it means that the cost of goods sold (COGS) is understated.

This is because the cost of goods sold is calculated as:

COGS = Beginning Inventory + Purchases - Ending Inventory

If ending inventory is overstated, the COGS will be lower than it should be, resulting in higher gross profit and net income.

Explanation

Compound interest provides a snowball effect, where interest earns interest.

It resulting in a significantly higher total amount over time, compared to simple interest.

It only earns interest on the principal amount.

Explanation

The longer the investment period, the more time the interest has to compound and grow.

It resulting in a greater amount of compound interest earned.

This means that a longer investment period will yield a higher return on investment.

Explanation

If future cash flows are underestimated, IRR decreases.

As actual returns would be higher.

This making the investment more attractive.

But resulting in a lower calculated IRR.

Explanation

A higher required rate of return reduces the IRR, as it increases the cost of capital.

This making it more difficult for the project to generate returns that meet or exceed the required threshold.

Explanation

COGS (Cost of Goods Sold) is a direct expense because it is directly related to the production and sale of a company's products or services.

It represents the direct cost of producing and selling a company's products.

Such as labor, materials, and overhead.

Explanation

COGS (Cost of Goods Sold) is an expense account that is subtracted from Revenue to calculate Gross Profit.

As COGS increases, Gross Profit and subsequently Net Income decrease.

The impact of COGS on the income statement:

• Revenue > COGS = Gross Profit > Operating Expenses = Net Income
• Higher COGS → Lower Gross Profit → Lower Net Income
• Lower COGS → Higher Gross Profit → Higher Net Income