The Payback Period and Accounting Rate of Return (ARR)methods Are

question 65

True/False

The payback period and accounting rate of return (ARR)methods are suitable to investments with a short time span.

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Definitions:

Operating Assets

Assets that are used for the day-to-day operations of a business such as cash, inventory, and machinery.

Residual Income

The amount of income that an individual or company has after subtracting all costs and expenses, including the cost of capital.

Net Operating Income

The income generated from a company's everyday business operations, indicating the profitability from core operations before interest and taxes.

Contribution Margin

The amount by which sales revenue exceeds variable costs of a product, used to cover fixed costs and generate profit.