In Determining the Dollar Amount to Use for Operating Assets

question 54

Multiple Choice

In determining the dollar amount to use for operating assets in the return on investment (ROI) calculation, companies will generally use either net book value or gross cost of the assets. Which of the following is not an argument for the use of net book value rather than gross cost?

• A) It is consistent with how assets are reported on the balance sheet.
• B) It eliminates the depreciation method as a factor in ROI calculations.
• C) It encourages the replacement of old, worn-out equipment.
• D) It will result in a decrease of ROI each year.

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Definitions:

Brand's Appeal

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Communicate

The act of conveying information or expressing ideas and feelings through verbal or nonverbal means.

Segmentation

The process of dividing a market into distinct groups of buyers with different needs, characteristics, or behaviors who might require separate products or marketing strategies.

Psychographics

The study and classification of people according to their attitudes, aspirations, and other psychological criteria, especially in market research.