A Firm Has an Average Investment of $1,000 During the Year

question 63

Multiple Choice

A firm has an average investment of $1,000 during the year. During the same time, the firm generates after-tax earnings of $150. Calculate the economic value added (EVA) for the firm. (The cost of capital is 10 percent.)

• A)$100
• B)$50
• C)$120
• D)$150

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Definitions:

Adjustments

These are entries made in accounting to record expenses that have occurred but are not accurately represented in the financial statements at the end of the accounting period.

Journal

A detailed record where all financial transactions of a business are initially recorded before being summarized in the ledger.

Ledger

A ledger is a comprehensive collection of accounts used in accounting to record and summarize all financial transactions.

Capital Account

An account used for a proprietorship that represents the owner’s equity.