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:

Cash Receipts

The total amount of cash and cash equivalents received by a company during a given period, including sales, refunds, and other cash inflows.

Liabilities

Financial obligations or debts that a company owes to others, which are expected to be settled through the transfer of assets, provision of services, or other economic benefits.

Income Statement Account

A financial account that shows the company's revenues, expenses, and net income over a specific period.

Petty Cash Transactions

Small purchases or expenditures paid using a readily available cash fund.