Division X's Profit Margin Is 17%, and Its Investment Turnover

question 56

Multiple Choice

Division X's profit margin is 17%, and its investment turnover is 4.2.What is the rate of return on investment for Division X?

• A) 4.0%
• B) 71.4%
• C) 26.8%
• D) 38.2%

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Definitions:

Direct Method

A cash flow statement presentation technique that lists specific types of cash inflow and outflow transactions directly.

Indirect Method

A method for calculating cash flows in which net income is adjusted for changes in balance sheet accounts to reflect cash transactions.

Cash Equivalent

Short-term, highly liquid investments that are easily convertible to known amounts of cash and very close to their maturity.

Accruals

Accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash transaction occurs.