Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
25 Cards in this Set
- Front
- Back
|
Accounting rate of return |
A method of appraising capital investments where the average annual profits from a project are divided into the average investment cost, also known as return on investment and return on capital employed |
|
|
Annual percentage rate (APR) |
A discount or interest rate quoted as a rate per annum |
|
|
Annuity |
An asset that pays a fixed sum each period for a specified number of periods |
|
|
Compounding interest |
The concept of adding the interest earned to the original capital invested so that further interest is generated |
|
|
Cost of capital |
The financial return that an organization could receive if, instead of investing cash in a capital project, it invested the same amount in securities on the financial markets, also known as the opportunity cost of an investment, the minimum required rate of return, the discount rate and the interest rate |
|
|
Cost benefit analysis (CBA) |
An investment appraisal technique developed for use by non-profit making organizations that defines the costs and benefits of a project in much wider terms that those included in investment appraisals undertaken in the pursuit of profit maximization |
|
|
Discount rate |
The financial return that an organization could receive if, instead of investing cash in a capital project, it invested the same amount in securities on the financial markets, also known as the opportunity cost of an investment, the minimum required rate of return, the cost of capital and the interest rate |
|
|
Discounted cash flow (DCF) |
A technique used to compare returns on investments that takes account of the time value of money |
|
|
Discounted payback method |
A version of the payback method of appraising capital investments in which future cash flows are discounted to their present values |
|
|
Discounted present value |
The value today of cash to be received in the future, calculated by discounting |
|
|
Discounted rate of return |
A technique used to make capital investment decisions that take into account the time value of money, representing the true interest rate earned on an investment over the course of it's economic life, also known as the internal rate of return (IRR) |
|
|
Discounting |
The process of converting cash to be received in the future into a value at the present time by the use of an interest rate |
|
|
Interest rate |
The financial return that an organization could receive if, instead of investing cash in a capital project, it invested the same amount in securities on the financial markets, also known as the opportunity cost of an investment, the minimum required rate of return, the cost of capital and the discount rate |
|
|
Internal rate of return (IRR) |
A technique used to make capital investment decisions that takes into account the time value of money, representing the true interest rate earned on an investment over the course of it's economic life, also known as discounted rate of return |
|
|
Minimum required rate of return |
The financial return that an organization could receive if, instead of investing cash in a capital project, it invested the same amount in securities on the financial markets, also known as the opportunity cost of an investment, the cost of capital, the discount rate and the interest rate |
|
|
Mutually exclusive |
In the context of comparing capital investments, a term used to describe projects where the acceptance of one project excludes the acceptance of another |
|
|
Net present value (NPV) |
The present value of the net cash inflows from a project less the initial investment outlay |
|
|
Opportunity cost of an investment |
The financial return that an organization could receive if, instead of investing cash in a capital project, it invested the same amount in securities on the financial markets, also known as the minimum required rate of return, the cost of capital, the discount rate and the interest rate |
|
|
Payback method |
A simple method to appraise capital investments, defined as the length of time that is required for a stream of cash proceeds from an investment to recover the original cash outlay |
|
|
Present value |
The value today of cash to be received in the future |
|
|
Return on capital employed |
A method of appraising capital investments where the average annual profits from a project are divided into the average investment cost, also known as the accounting rate of return on investment |
|
|
Return on investment |
A method of appraising capital investments where the average annual profits from a project are divided into the average investment cost, also known as the accounting rate of return and return on capital employed |
|
|
Risk-free gilt-edged securities |
Bonds issued by the UK government for set periods of time with fixed interest rates |
|
|
Time value of money |
The concept that a specific amount of cash is worth more now than it will be in the future |
|
|
Weighted average cost of capital |
The overall cost of capital to an organization, taking into account the proportion of capital raised by debt and equity |
