Real interest rate and real cash flows do not include_____________?
Correct answer: C. Inflation effects
- A. Equity effects
- B. Debt effects
- C. Inflation effects
- D. Opportunity effects
Explanation
Real interest rates and real cash flows are stated after removing the effect of changes in the general price level. Inflation effects therefore belong to nominal, not real, figures.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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