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16 Cards in this Set
- Front
- Back
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A measure of profitability computed by dividing the average annual operating income from an asset by the initial investment in the asset.
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Accounting Rate of Return
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A stream of equal installments made at equal time intervals.
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Annuity
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The process of making capital investment decisions. Companies make capital investments when they acquire capital assets- assets used for a long period of time.
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Capital Budgeting
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Choosing among alternative capital investments due to limited funds.
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Capital Rationing
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Interest computed on the principal and all interest earned to date.
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Compound Interest
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Management's minimum desired rate of return on an investment; also called the hurdle rate and required rate of return.
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Discount Rate
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Management's minimum desired rate of return on an investment; also called the discount rate and required rate of return.
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Hurdle Rate
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The rate of return (based on discounted cash flows) that a company can expect to earn by investing in a capital asset. The interest rate that makes the NPV of the investment equal to zero.
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Internal Rate of Return
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LEED, which stands for "Leadership in Energy and Environmental Design," is a certification system developed by the U.S. Green Building Council as a way of promoting and evaluating environmentally friendly construction projects.
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LEED Certification
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The difference between the present value of the investment's net cash inflow and the investment's cost.
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Net Present Value (NPV)
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The length of time it takes to recover, in net cash inflows to its projected net cash inflows.
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Post-audits
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An index that computes the number of dollars returned for every dollar invested, with all calculations performed in present value dollars. It is computed as present value of net cash inflows divided by investment; also called profitability index.
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Present Value Index
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An index that computes the number of dollars returned for every dollar invested, with calculations performed in present value dollars. Computed as present value of net cash inflows divided by investment; also called present value index.
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Profitability Index
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Management's minimum desired rate of return on an investment; also called the discount rate and hurdle rate.
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Required Rate of Return.
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Interest computed only on the principal amount.
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Simple Interest
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The fact that money can be invested to earn income over time.
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Time Value of Money
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