The Average Rate of Return Is a Measure of Profitability

question 121

True/False

The average rate of return is a measure of profitability computed by dividing the average annual cash inflows from an asset by the average amount invested in the asset.

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Definitions:

Common Stock

Common Stock represents shares in a company that entitle the holder to vote at shareholders' meetings and to receive a part of the company's profits as dividends.

Stated Value Stock

Stated value stock is an issue of shares that does not have a par value but instead has a nominal stated value assigned by the company.

Preferred Stock

A type of equity security that offers dividends and other advantages before common stock, in the event of liquidation.

Common Shareholders

Individuals or entities that own shares of common stock in a corporation, granting them voting rights and a claim on profits.