The Following Question Relates to PQR, Which Has the Following

question 19

Multiple Choice

The following question relates to PQR, which has the following ratios: return on assets, (ROA) 12 per cent; return on equity (ROE) 14 per cent; and current ratio (CR) of 1.8:1. The company changed accounting methods by deciding to capitalise rather than expense a research and development outlay. This will:

• A) increase ROE, but have no effect on ROA and CR.
• B) increase ROA, ROE and CR.
• C) increase ROA and ROE but have no effect on CR.
• D) have no effect on ROA, ROE or CR.

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Definitions:

Substantial Investment

A significant amount of money or resources expended in an endeavor with the expectation of achieving a profit or material result.

Order Getting

The process of actively seeking out customers and persuading them to purchase a product or service.

Creativity

The ability to produce original and unusual ideas, or to make something new or imaginative.

Financial Investment

The allocation of resources, typically money, in the expectation of generating an income or profit.