In Calculating Return on Investment (ROI),the Use of Book Values

question 68

Multiple Choice

In calculating return on investment (ROI) ,the use of book values of assets-particularly fixed assets-in the ROI denominator

• A)is the preferable method.
• B)may cause a manager of a division with fully depreciated assets to be reluctant to replace the assets with more costly assets.
• C)is required by generally accepted accounting principles.
• D)may cause a manager of a division with fully depreciated assets to replace the assets with newer,more efficient,but more costly assets.

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Definitions:

Basket Of Goods

A collection of products or services considered representative for purposes of measuring inflation or cost of living.

Base Year

A specific year against which economic or financial data is compared to measure changes and trends over time.

Price

The amount of money required to purchase a good, service, or asset.

Inflation

The speed at which prices for general goods and services go up, resulting in a decline in how much money can buy.