When Calculating the Accounting Rate of Return, Which of the Following

question 49

Multiple Choice

When calculating the accounting rate of return, which of the following formula elements is not used?

• A)operating income.
• B)a present value factor.
• C)depreciation expense.
• D)average investment.

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Definitions:

Net Income

The net income of a business following the subtraction of all costs and taxes from the total earnings.

Ending Inventory

Ending inventory is the total value of goods available for sale at the end of an accounting period, calculated using the beginning inventory, additions, and subtractions of goods sold.

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life.

LIFO

"Last In, First Out", an inventory costing method where the most recently produced or acquired items are recorded as sold first.