Which of the Following Statement(s)is/are True? (A)If a Division's Return

question 43

Multiple Choice

Which of the following statement(s) is/are true? (A) If a division's return on investment (ROI) exceeds its cost of capital,then its residual income is positive.(B) If a division's cost of capital equals its return on investment (ROI) ,then its residual income is zero.

• A) Only (A)is true.
• B) Only (B)is true.
• C) Both (A)and (B)are true.
• D) Neither (A)and (B)is true.

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Definitions:

Acid-Test Ratio

A financial indicator that evaluates the capability of a firm to settle its short-term obligations using its most readily convertible assets, not including inventory.

Year-End Balance Sheet

A financial statement that displays a company's assets, liabilities, and stockholders' equity as of the last day of the financial year.

Data

Information that is collected, stored, analyzed, and interpreted to support decision-making processes.

Trend Percentages

Analysis method used in financial and operational analysis to observe the direction and pace of changes in related data points over time.