In Determining the Dollar Amount to Use for Operating Assets

question 70

Multiple Choice

In determining the dollar amount to use for operating assets in the return on investment (ROI) calculation,companies will generally use either net book value or gross cost of the assets.Which of the following is an argument for the use of net book value rather than gross cost?

• A) It is consistent with how assets are reported on the balance sheet.
• B) It eliminates the depreciation method as a factor in ROI calculations.
• C) It encourages the replacement of old,worn-out equipment.
• D) all of the above.

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Definitions:

Intangibles

Intangibles are assets that lack physical substance but possess value, such as intellectual property, goodwill, and brand recognition.

Goods

All physically existing things that are movable at the time of identification in the contract for sale.

Proceeds

The amount of money received from a transaction, often referring to the sale of assets or property.

Documents Of Title

Legal documents that prove ownership of goods or property, such as bills of lading or warehouse receipts.