To Assess the Adequacy of the Return on Capital Employed

question 50

Multiple Choice

To assess the adequacy of the return on capital employed (ROCE) that a firm earned in its most recent financial year,which of the following would not be an appropriate benchmark:

• A)The ROCE earned by the same firm in previous years
• B)The ROCE earned by competitors during the same period
• C)The firm's cost of equity capital
• D)The firm's weighted average cost of capital

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Definitions:

Thinning of the Lithosphere

The reduction in thickness of the lithosphere, often occurring in response to tectonic processes such as stretching and rifting.

Normal Faulting

A type of faulting where the hanging wall block moves down relative to the footwall block, typically associated with extensional tectonic environments.

Oceanic and Continental Plates

The two types of tectonic plates that make up the Earth's crust, with oceanic being denser and sinking beneath continental plates at subduction zones.

Plate Margins

The boundaries between tectonic plates, which can be divergent, convergent, or transform, influencing the geological processes at these locations.