If the Accounting Rate of Return Exceeds the Required Accounting

question 152

Multiple Choice

If the accounting rate of return exceeds the required accounting rate of return,

• A)invest in the capital asset.
• B)do not invest in the capital asset.
• C)only invest if the payback period is also greater than the required rate of return.
• D)only invest if the payback period is also less than the required rate of return.

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Definitions:

Treasury Stock

Shares that were issued and subsequently reacquired by the issuer, not considered when calculating earnings per share or dividends.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to shareholders, often reinvested in the business.

Dividend Restrictions

Limitations or rules imposed on a corporation's ability to pay dividends to shareholders, often due to legal, contractual, or financial conditions.

Public Corporations

Companies that have issued securities through an initial public offering (IPO) and are traded on at least one stock exchange or in over-the-counter markets.