Which One of the Following Correctly Applies to the Average

question 108

Multiple Choice

Which one of the following correctly applies to the average accounting rate of return?

• A)It considers the time value of money.
• B)It measures net income as a percentage of the sales generated by a project.
• C)It is the best method of analyzing mutually exclusive projects from a financial point of view.
• D)It is the primary methodology used in analyzing independent projects.
• E)It can be compared to the return on assets ratio.

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Definitions:

Desired Return

The target profit or income level that an investor or business aims to achieve on an investment or project.

Target Cost

The estimated price for a product that would allow a company to achieve a desired profit margin while remaining competitive in the market.

Useful Life

The estimated duration an asset is expected to be functional and useful before it needs to be replaced or becomes obsolete.

Operating Cost

Expenses associated with the day-to-day functions of a business excluding cost of goods sold, such as rent, utilities, and payroll.