Charlie Is a Plumber Who Uses His Own Tools to Work

question 49

Multiple Choice

Charlie is a plumber who uses his own tools to work. He is generally hired for specific jobs for short durations. He receives lump sums after completing these jobs. Which of the following statements is true of this scenario?

• A) Charlie's physical conduct is controlled by his employer.
• B) Charlie is the principal in an agency relationship.
• C) Charlie is an independent contractor.
• D) Charlie can work for only one employer at a time.

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Definitions:

Average Accounting Return Rule

A capital budgeting criterion that measures the profitability of an investment as the average net income divided by the average book value.

Profitability Index Rule

A capital budgeting technique used to decide whether to invest in a project, calculated as the present value of future cash flows divided by the initial investment cost.

Capital Budgeting Technique

Methods used by companies to evaluate and select investments in long-term assets based on their potential to generate cash flows in the future.

Profitability Index

A financial metric used to evaluate the desirability of an investment, calculated as the present value of future cash flows divided by the initial investment.