Using Beginning Balances for the Investment Base in Computing Return

question 101

Multiple Choice

Using beginning balances for the investment base in computing return on investment (ROI) might encourage managers to acquire assets:

• A) early in the year and dispose of assets late in the year.
• B) early in the year and dispose of assets early in the year.
• C) late in the year and dispose of assets late in the year.
• D) late in the year and dispose of assets early in the year.

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Definitions:

Intangible Assets

Non-physical assets that possess value due to their intellectual or proprietary characteristics, such as patents and trademarks.

Indefinite Lives

Refers to intangible assets that aren't subject to amortization due to their perpetual useful life, such as trademarks or brand names.

Impairment Tested

Impairment testing is the process of evaluating assets to determine if their carrying value exceeds the recoverable amount, indicating a need for impairment charges.

Amortized

The process of gradually writing off the initial cost of an asset over a period according to a fixed plan.