From the Viewpoint of a Stockholder, Which of the Following

question 14

Multiple Choice

From the viewpoint of a stockholder, which of the following relationships do you consider of least significance?

• A) The return on assets consistently is higher than the industry average.
• B) The return on equity has increased in each of the past five years.
• C) Net income is greater than the amount of working capital.
• D) The return on assets is greater than the rate of interest being paid to creditors.

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Definitions:

Worst-Case Scenario

The most severe or unfavorable outcome that may happen in a given situation, often used in planning and risk management.

Soft Rationing

An internal policy mechanism by which a company limits the amount of funding allocated to new or existing projects, without a shortage of available funds.

NPV Project

A project evaluated using the Net Present Value method, which calculates the present value of all cash flows associated with the project, minus the initial investment.

Straight-Line

A method of calculating depreciation of an asset which assumes the asset will lose an equal amount of value each year over its useful life.