The Average Rate of Return Is a Measure of Profitability

question 121

True/False

The average rate of return is a measure of profitability computed by dividing the average annual cash inflows from an asset by the average amount invested in the asset.

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Definitions:

Discount on Bonds Payable

The difference between the face value of a bond and its selling price when the bond is sold for less than its face value.

Bonds Payable

Long-term liabilities represented by promissory notes issued by a company to raise capital, to be repaid at a future date.

Installment Note

A debt instrument that requires the borrower to make regular payments (installments) of principal and interest over a set period until the total debt is paid.

Journal Entry

A record in the books of accounts that represents a transaction and its effect on various accounts.