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mojhsa [17]
3 years ago
13

Average Accounting Return. Concerning AAR:a. Describe how the average accounting return is usually calculated and describe the i

nformation this measure provides about a sequence of cash flows. What is the AAR criterion decision rule?b. What are the problems associated with using the AAR as a means of evaluating a project’s cash flows? What underlying feature of AAR is most troubling to you from a financial perspective? Does the AAR have any redeeming qualities?
Business
1 answer:
evablogger [386]3 years ago
8 0

Answer:

a. Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the AAR criterion decision rule?

Average accounting return = average net income / average investment

The problem with AAR is that net cash flows are not equal to net income since depreciation expense and changes in net working capital are not accounted for by AAR.

The criterion decision rule is that projects with an AAR above a certain measure.

b. What are the problems associated with using the AAR as a means of evaluating a project’s cash flows? What underlying feature of AAR is most troubling to you from a financial perspective? Does the AAR have any redeeming qualities?

it doesn't consider net cash flows, nor time value of money. Personally, accounting is an extremely important tool but it only reflects a partial perspective of a business. E.g. a business might have a huge net income but if it doesn't have enough cash to function, it will go bankrupt. In finance, cash is king.

Personally, my biggest problem with AAR is that it doesn't consider net cash flows. I've been on situations where the company I worked for was apparently doing great, but our accounts receivables were huge and we couldn't collect money fast enough. My job was basically go to different banks and convince them of loaning us cash. The worst part was that even without being able to collect cash, we still had to pay taxes and that was another huge problem.

I believe that AAR is still used because of its simplicity. Also, taxes are paid based on accounting profits and many firms base they compensation plans on them.

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Sunshine Blender Company sold 3000 units in October at a sales price of $45 per unit. The variable cost is $25 per unit. Calcula
Alekssandra [29.7K]

Answer:

Total contribution margin= $60,000

Explanation:

Giving the following information:

Units sold= 3,000

Selling price per unit= $45

Unitary variable cost= $25

First, we will calculate the unitary contribution margin:

Unitary contribution margin= 45 - 25= $20

Now, total contribution margin:

Total contribution margin= 3,000*20= $60,000

5 0
3 years ago
When using straight line amortization on premium bonds:_______.
Vsevolod [243]

Answer: the same interest income is reported each year

Explanation:

The straight-line amortization method is a simple way to amortize a bond as an equal amount of interest are allocated over every accounting period.

When using straight line amortization on premium bonds, the same interest income is reported each year. Therefore, option A is the best answer.

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3 years ago
What are the three stages at which advertising evaluation occurs, and what do marketers evaluate at each stage? What are the dif
krek1111 [17]

Answer:

There are 3 phases of advertising: Awareness (audience building), Consideration (lead generation and obtaining authority), and Conversion (nurture and sales). Advertising has a history going back millennia. In fact, the origins of advertising go back to ancient times or even earlier, right to the stone age. From rock carvings and papyrus to the radio and T.V. and the latest addition of online advertising, the journey of advertising has been a most metamorphic one.

1. Pre-test and Post Test: Pre-test implies testing advertising message before it is sent to specific media.

2. Communication and Sales Effect Test.

3. Laboratory and Field Test.

4. Experimental and Survey Test.

5. Message and Media Effect Test.

Inquiry tests: It is controlled experiment conducted in the field. In inquiry test, the number of consumer inquiries produced by an advertising copy or the medium is considered as to the measure of its communication effectiveness.

Copy testing often evaluates ad based on demographics and certain changes in the ad are made with respect to its demographics. Memory tests (recall/recognition), direct response tests, persuasion tests, continuous measurement tests, psychological response tests are some of the quantitative methods of copy testing.

(My Answer^)

Explanation:

(Plato Example Answer) : Advertising evaluation can occur at three different stages: during ad in preparation, after the ad launches in the market, and while the ad campaign is running in the market.

During the first stage before the ad’s launch, marketers use pre-testing methods to evaluate an ad’s effectiveness. They help a company identify and correct flaws in its ad copy through trials or surveys. Randomly selected consumers view the ad. Based on the data gathered from their responses, the company will make changes in the ad copy or select one ad from among different ad alternatives. Various aspects of an ad copy, such as colors, message, language, design, etc., might change or gain further approval based on the results of these tests. Pre-testing methods include consumer jury methods such as an order of merit test or paired comparison test, advertising concept test, direct mail test, and in-home projection test.

During the post-testing stage after the ad’s market launch, marketers use post-testing methods to measure ad effectiveness. These tests help in gauging the immediate effect that the ad campaign has had on consumers and determine whether the ad has succeeded in achieving its goals. Post-testing methods also make use of randomly selected samples of respondents from the market. The methods include a rating scale test, day-after recall test, portfolio test, and association test.

The ad campaign is continuing its market run. During this stage, marketers use concurrent testing methods to evaluate ad effectiveness. If properly implemented, the tests can help the company to adapt an ad campaign to make it more effective. Concurrent testing methods also help advertisers to decide which expenses to curtail. These methods depend on observing consumers’ reactions to the ad and thus determining how consumers perceive the ad. Concurrent testing methods include telephone surveys, interview tests, and passers-by count tests.

If I were an advertiser, I would spend money on pre-testing methods because they would help me to make critical changes in an ad’s content before it goes out in the market. These methods of measuring ad effectiveness are more proactive. For instance, an advertising concept test can help in gathering consumer responses regarding various aspects of an advertisement. I would make sure that the sample selected for these tests is large enough so that it would leave little room for uncertainty regarding the ad’s effectiveness. In addition, I would use more than one method to measure the effectiveness of my ad campaign.

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