The Return on Investment Measure of Performance

question 32

Multiple Choice

The return on investment measure of performance:

• A)is relevant only to business enterprises.
• B)is used by individuals to compare investment performance.
• C)is calculated using sales as the amount of return.
• D)is calculated using total assets at the beginning of the period as the amount of investment.

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Definitions:

Bonds

Fixed-income securities that represent a loan made by an investor to a borrower, typically corporate or governmental, which pays periodic interest payments and the return of the principal at maturity.

Discount

A reduction applied to the normal selling price of goods or services, typically for the purpose of enticing customers or accelerating sales.

Journal Entry

A record in accounting that represents a transaction or adjustment affecting at least two accounts, which is necessary to keep the financial statements accurate.

Effective-Interest Method

An accounting technique used to amortize the discount or premium on bonds payable or receivable over the life of the bond, reflecting the bond's yield.