The FGH Company Has an Asset Turnover of 3

question 32

Multiple Choice

The FGH Company has an asset turnover of 3.0 times,using assets of $45,000.The company also has a return on investment (ROI) of 20%.If the residual income was $2,250,what was the company's cost of capital?

• A)6.0%.
• B)10.0%.
• C)15.0%.
• D)20.0%.

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Definitions:

Level of Activity

A measure of the volume of work or production capacity a business entity engages in over a specific period.

Employee Salaries and Wages

Payments made to employees for their labor, including both fixed salaries and variable wages.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, allowing for more accurate forecasting and planning.

Planning Budget

A budget created at the beginning of the budgeting period that is valid only for the planned level of activity.