In Determining the Dollar Amount to Use for Operating Assets

question 2

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:

U.S. Government Securities

Financial instruments issued by the U.S. Department of the Treasury or other federal government agencies to finance federal spending, including Treasury bonds, notes, and bills.

Bank Reserves

The amounts of funds that a bank holds in its reserve account with the central bank or as cash in vault, to meet any sudden withdrawals.

Market Rate

The prevailing price or interest rate at which goods, services, or securities are bought and sold in a competitive marketplace.

Independence

Independence is the condition of a nation, country, or state which exercises self-governance, and sovereignty, over its territory.