Managers May Use the Accounting Rate of Return to Evaluate

question 163

Multiple Choice

Managers may use the accounting rate of return to evaluate potential investment projects because

• A)debt contracts require that a firm maintain certain ratios that are affected by income and long-term asset levels.
• B)it serves as a screening measure to insure that new investments do not affect key financial ratios.
• C)bonuses to managers may be based on accounting income and/or return on assets.
• D)it can be tied to the manager's personal income.
• E)all of these.

Describe the concept of the liquidity trap and its implications for monetary policy.

Identify the factors influencing the effectiveness of monetary policy in recessionary periods.

Recognize the impact of financial regulations on the banking sector and financial crises.

Understand the role and implications of TARP during the financial crisis.

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Definitions:

Heuristics

Simple, efficient rules, either hard-coded by evolutionary processes or learned, that help in making decisions, forming judgments, or solving problems quickly and with minimal effort.

Financial Risks

Financial risks involve the potential loss of monetary investment or the possibility of not achieving the expected financial returns, affecting individuals or businesses.

Availability Heuristic

An intellectual quick route that depends on the readily recalled instances when contemplating a certain matter, notion, technique, or judgement.

Welfare Fraud

The act of illegally using or obtaining government assistance resources or funds by intentional misinformation or concealment of information.