When Calculating the Rate of Return on Total Assets the Interest

question 46

Multiple Choice

When calculating the rate of return on total assets the interest is added back to profit before tax:

• A) because it must be paid regardless of profits.
• B) because interest rates are variable over time.
• C) to indicate to lenders that some risk is involved.
• D) to reflect the fact that the efficient use of resources should be examined independently from the method of financing.

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Definitions:

Ethical Act

An action guided by a set of moral principles or values, often involving a decision of right versus wrong.

Accounting Manager

A professional responsible for overseeing and managing the accounting department's operations, ensuring accurate financial reporting and adherence to accounting principles.

Equivalent Units

A concept used in cost accounting to convert the amount of work done on partially finished goods into the number of fully completed units.

Conversion Costs

Costs incurred to convert raw materials into finished products, typically including labor and overhead expenses.