Ross Wants to Invest Some Money That He Just Inherited

question 286

Multiple Choice

Ross wants to invest some money that he just inherited.He found that his bank offers a savings account paying a guaranteed 3% rate of return.However,he would like to earn a higher return.Ross should keep in mind that to earn a higher return on his money he:

• A)will have to invest overseas.
• B)should invest in a business that has a very stable and predictable rate of return.
• C)will probably have to accept a higher level of risk.
• D)will probably have to engage in illegal activities.

---

Definitions:

Common Fixed Expenses

Expenses that do not vary with the level of production or sales, shared among different business segments or products.

Segmented Income Statement

An income statement broken down into segments, such as product lines or geographical areas, to analyze profitability.

Absorption Costing

An accounting technique that assigns the total manufacturing costs, including direct materials, direct labor, and both kinds of manufacturing overhead (fixed and variable), to a product’s cost.

Gross Margin

The difference between sales revenue and cost of goods sold, expressed as a percentage of sales revenue, indicating the financial health and profitability of a business.