If the Purpose of an Entity Is to Maximise the Wealth

question 11

Multiple Choice

If the purpose of an entity is to maximise the wealth of its owners,the most complete measure of economic profit is considered to be:

• A)residual income.
• B)economic value added.
• C)return on investment.
• D)return on sales.

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Definitions:

Immediate Cash Outflow

Expenditures or payments that require immediate disbursement of cash from a business.

Working Capital

is the difference between a company's current assets and current liabilities, indicating its short-term financial health.

Salvage Value

Salvage value is the estimated residual value of an asset at the end of its useful life, reflecting its expected worth in secondary markets.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.