Reference: 12-01
the Following Information Is Available on Company A

question 42

Multiple Choice

Reference: 12-01
The following information is available on Company A: $$\begin{array} { | l | l | } \hline \text { Sales } & \$ 900,000 \\\hline \text { Net operating income } & 36,000 \\\hline \text { Stockholders' equity } & 100,000 \\\hline \text { Average operating assets } & 180,000 \\\hline \text { Minimum required rate of return } & 15 \% \\\hline\end{array}$$
-Cable Company had the following results for the year just ended: $$\begin{array} { | l | l | } \hline \text { Net operating income } & \$ 2,500 \\\hline \text { Turnover } & 4 \\\hline \text { Return on investment } & 20 \% \\\hline\end{array}$$ Cable Company's average operating assets during the year were?

• A)$10,000.
• B)$50,000.
• C)$12,500.
• D)$200,000.

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Definitions:

Substitution Effect

The alteration in buying behaviors resulting from shifts in relative prices, prompting consumers to swap costlier products with less expensive options.

Higher Wage

An increased rate of pay or salary for employees, often sought after in negotiations or as a result of economic or institutional changes.

Leisure Time

Time that an individual can spend at their own discretion, not occupied by work or domestic responsibilities.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with less costly alternatives.