The Formula for Calculating the Accounting Rate of Return for a Capital

question 126

Multiple Choice

The formula for calculating the accounting rate of return for a capital asset is

• A)average annual operating income from asset/amount invested in asset.
• B)average annual net cash inflow from asset/amount invested in asset.
• C)(average annual operating income + depreciation expense)/amount invested in asset.
• D)(average annual cash inflows - depreciation expense)/(amount invested in asset + residual value of asset).

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Definitions:

Informal Reasoning

The process of reasoning without strict adherence to formal rules and structures, often used in everyday problem-solving.

Formal Reasoning

The process of thinking in a logical and systematic manner, often associated with problem-solving and decision-making in structured contexts.

Restructuring

The act of changing the organization, operation, or structure of something to improve efficiency or outcome.

Mental Sets

A tendency to approach a problem in the same way that has worked in the past, which may make it harder to solve a problem.