If the Average ROE in the Heating and Cooling Industry

question 84

Multiple Choice

If the average ROE in the heating and cooling industry is 10.1%, and Thermacorp's ROE is 17.3%, Thermacorp is said to have

• A) below average accounting performance.
• B) above average economic performance.
• C) above average accounting performance.
• D) below average economic performance.

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Definitions:

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Group Depreciation Method

An accounting method that applies a single depreciation rate to a group or pool of assets with similar characteristics and useful lives, instead of depreciating each asset individually.

Depreciation Rate

The percentage rate at which an asset is depreciated across its useful life, essentially spreading its cost over time.

Residual Value

The estimated amount that an asset will be worth at the end of its useful life, after depreciation has been subtracted.