Which of the Following Statements Is Correct Concerning Changes from Year

question 18

Multiple Choice

Which of the following statements is correct concerning changes from year 1 to year 2 at Tricrop?

• A)Despite favorable changes in the tax rate, return on net operating assets has decreased
• B)Despite favorable changes in net operating asset utilization, return on net operating assets has decreased
• C)Largely because of favorable changes in tax rates, return on net operating assets has increased
• D)Largely due to favorable changes in leverage, return on net operating assets has increased

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Definitions:

Residual Income

The income that remains after deducting all required costs of capital from the net operating income.

Investment Centers

Divisions or units within an organization that are responsible for both generating revenue and controlling costs, thus having an impact on the investment returns.

Return On Investment

A measure of the profitability of an investment, calculated as the net profit from the investment divided by the cost of the investment.

Residual Income

The amount of income that an individual or business has after all personal debts and expenses, including the cost capital, have been paid.