In the Earnings Methods of Business Valuation, the Rate of Return

question 86

Multiple Choice

In the earnings methods of business valuation, the rate of return associated with a "normal risk" business is:

• A) 15 percent.
• B) 25 percent.
• C) 35 percent.
• D) 50 percent.

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Definitions:

Credit Loss

A reduction in the projected future cash flows from a loan or other financial instrument due to the borrower's inability to make payments as agreed.

Fair Value

An accounting term referring to the estimated worth of an asset or liability based on current market conditions.

Consolidated Gross Profit

The total gross profit of a company and its subsidiaries before deducting any operating expenses, interest, and taxes, reported in the consolidated financial statements.

Transfer Price

The price used for the sale or transfer of goods and services between divisions within the same company, often used for accounting and tax purposes.