The Simple Arithmetic Average Return and the Geometric Average Return

question 98

True/False

The simple arithmetic average return and the geometric average return will be equal only if the annual returns are increasing over time.

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Definitions:

Adjusting Entries

Entries recorded in journals at the conclusion of an accounting period to assign revenues and costs to the time frame in which they were genuinely incurred.

Source Documents

Source documents are original records that contain the details to support business transactions, such as receipts and invoices.

Adjustments Columns

In accounting, columns in ledgers or worksheets where adjustments are recorded before preparing the final financial statements.

General Ledger

A comprehensive set of accounts that records all transactions of a business, leading to the preparation of financial statements.