The Investment Decision Rule That Relates Average Net Income to Average

question 97

Multiple Choice

The investment decision rule that relates average net income to average investment is the:

• A)discounted cash flow method.
• B)average accounting return method.
• C)average payback method.
• D)average profitability index.
• E)None of the above.

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Definitions:

Dividend Payout Ratio

A financial ratio indicating the percentage of a company's earnings paid to shareholders in dividends.

Capital Budgeting

The process businesses use to evaluate and select major capital investments, based on their potential to generate additional profits or cash flow.

Clientele Effect

The theory suggesting that the types of dividends a company pays can attract different types of investors.

Stockholders

Individuals or entities that hold stock in a company, thereby owning a portion of the company and having certain rights, such as the right to vote on corporate matters.