The Average Accounting Return

question 90

Multiple Choice

The average accounting return:

• A)measures profitability rather than cash flow.
• B)discounts all values to today's dollars.
• C)is expressed as a percentage of an investment's current market value.
• D)will equal the required return when the net present value equals zero.
• E)is used more often by CFOs than the internal rate of return.

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Definitions:

Long-Term Liabilities

Obligations that are not due or payable for a long time, usually for more than a year.

Net Sales

The total revenue from sales reduced by returns, allowances, and discounts.

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overhead, payroll, taxation, and interest payments.

Cost of Goods Sold

The total direct costs incurred in producing goods which are sold, including materials and labor.