The process of determining the present value of a cash flow or a series of cash flows to be received or paid in the future is known as _____.
A)compounding
B)discounting
C)consolidation
D)amortization
E)annualizing

Question

The process of determining the present value of a cash flow or a series of cash flows to be received or paid in the future is known as _____. 
A)compounding
B)discounting
C)consolidation
D)amortization
E)annualizing

Quizplus · Accepted Answer

Discounting is the process of determining the present value of future cash flows by applying a discount rate. This is commonly used in financial analysis to evaluate investments or projects by estimating the future cash flows and discounting them back to their present value. Compounding is the opposite process, where the future value of a present cash flow is calculated. Consolidation refers to the process of combining financial statements of multiple companies. Amortization is the process of spreading out the cost of an intangible asset over its useful life, and annualizing refers to converting a figure from one period of time to an annual basis. These concepts are not directly related to determining the present value of a cash flow or a series of cash flows.

The Process of Determining the Present Value of a Cash