Return on Assets Is Useful in Evaluating Management, Analyzing and Forecasting

question 38

True/False

Return on assets is useful in evaluating management, analyzing and forecasting profits, and planning activities.

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Definitions:

Market Risk Premium

Slope of the Security Market Line; the difference between the expected return on a market portfolio and the risk-free rate.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and can finance its operations.

Risk-Free Rate

The return on an investment with zero risk, typically associated with government bonds.

Market Risk Premium

The Market Risk Premium is the additional return an investor expects from holding a risky market portfolio instead of risk-free assets.