The Ratio Which Would Be Most Helpful to an Investor

question 58

Multiple Choice

The ratio which would be most helpful to an investor who is investing in ordinary shares primarily for dividends rather than for appreciation in market price, is:

• A) return on total assets.
• B) dividend yield.
• C) rate of return on ordinary equity.
• D) current ratio.

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Definitions:

Variable Manufacturing Overhead

Refers to the costs that vary with the level of production output, including items such as indirect materials and electricity to run machinery.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products or job orders, calculated before the accounting period begins based on an estimate.

Machine-Hours

A measure of the amount of time a machine is operated, used for allocating machine-related costs to individual units of production.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity base, such as labor hours or machine hours.