Question

It is common for cash flow series, such as operating costs, construction costs, and revenues, to increase or decrease from period to period by a constant percentage. In this case, the uniform rate of change can be defined as __________ of cash flows. A) Uniform B) Linear gradient C) irregular D) geometric gradient

Answer 1

A constant percentage increase or decrease in cash flow series over periods is described as a geometric gradient.

Step-by-step explanation:

When cash flow series, such as operating costs, construction costs, and revenues, increase or decrease from period to period by a constant percentage, this is described as a geometric gradient of cash flows. Unlike a linear gradient where the amount of change is the same in each period, a geometric gradient means that the rate of change is constant in percentage terms, meaning each period the change is proportionally the same relative to the previous period. This is typical in situations where inflows and outflows are adjusted for inflation or when predicting growth that compounds over time.