Explanation

Calculating COGS (Cost of Goods Sold) helps businesses determine the direct costs associated with producing and selling their products or services.

By calculating COGS, businesses can:

• Determine the profitability of their products or services
• Set prices appropriately
• Identify areas for cost reduction and optimization
• Make informed decisions about production and inventory management

Explanation

In a period of rising prices, LIFO results in higher COGS.

Because the most recent (and more expensive) inventory is assumed to be sold first.

Explanation

APR stands for Annual Percentage Rate.

It is the interest rate charged on a loan or credit product over a year.

Including fees and other costs, expressed as a percentage of the loan or credit amount.

Explanation

The relationship between NPV and project risk is inverse.

As risk increases, NPV decreases.

Because a higher discount rate is used to account for the increased uncertainty.

Explanation

An increase in initial investment reduces the return on investment (ROI).

It consequently decreases the IRR, making the project less attractive.

This is because the higher initial investment reduces the project's profitability.

Explanation

Advertising expenses are a selling and marketing expense, not a direct cost of acquiring or producing the goods sold.

As such, they are not typically included in COGS (Cost of Goods Sold) for a retailer.

Explanation

Compound interest: Interest on both principal and accrued interest.

It leading to exponential growth and a snowball effect.

Explanation

Simple interest is calculated as a percentage of the original principal amount, without considering any accrued interest.

Compound interest takes into account both the original principal and any interest that has accumulated over time.

Explanation

NPV is considered superior to the payback period method.

Because it considers the time value of money, unlike payback period.

It ignores the timing and value of future cash flows.

Explanation

NPV is a versatile tool that allows for comparison of projects with different characteristics, including:

• Projects with different lifespans
• Projects with the same initial investment
• Projects with different cash flows