When a Firm Earns a Rate of Return on an Investment

question 12

Multiple Choice

When a firm earns a rate of return on an investment that _____,it makes a pure economic profit.

• A)is above its accounting costs
• B)is equal to its average variable cost
• C)is above the cost of borrowed funds
• D)just covers the firm's fixed costs

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Definitions:

Statement of Stockholders' Equity

A financial document that represents the changes in the equity interests of a company’s shareholders over a reporting period, including the issuance or purchase of shares, dividends paid, and earnings or losses.

Net Loss

The amount by which expenses exceed revenues, indicating that a business spent more than it earned during a period.

End-of-period Spreadsheet

An end-of-period spreadsheet is a tool used in accounting to compile all account balances at the end of a reporting period for review and adjustment.

Common Stock

Common Stock denotes an equity interest in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and capital appreciation.