To Assess Whether or Not a Firm Is Earning an Adequate

question 7

Multiple Choice

To assess whether or not a firm is earning an adequate rate of profit,return on capital employed (ROCE) is a better indicator than return on sales because:

• A)Sales are more variable than capital employed
• B)Return on sales varies between industries according to their capital intensity
• C)A firm's return on sales depends upon the choice between gross margin,operating margin,and net margin
• D)ROCE is based upon cash flow

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Definitions:

Prescribed Time Period

A specific duration set by a statute or agreement within which an action must be taken or a right may expire.

Entitled to Payment

Having a legal right or claim to receive money or compensation for goods or services provided.

Strict Tort Liability

A legal doctrine that holds a party responsible for damages caused by their actions or products, without the need for proving fault or negligence.

Product Line

A group of related products manufactured by a company, characterized by having similar functions or being sold to the same customer groups.