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.
Answer:
b) 2,000
Explanation:
sales price = $30
10% from each sale = $3
the amount of rent paid as a percentage of sales = $15,000 - $9,000 = $6,000
the indifference point in units = $6,000 / 10% revenue margin = $6,000 / $3 = 2,000 units
If Bates sells less than 2,000 units, then he should prefer option 2, but if he sells more than 2,000 units, then option 1 is better for him.
Answer:
Option D Only amounts known with absolute certainty are reported
Explanation:
This is incorrect statement because International Accounting Standard IAS 37 Provisions, Contingent Liabilities and Contingent Assets sheds light on the recording of future events that will arise as a result of past events. The standard is useful in estimating future events so saying that the absolutely certain amounts are reported is incorrect.
Answer:
The correct answer is D) gatefold.
Explanation:
In gatefold advertising it refers to that information that is displayed on more than one sheet and that needs to be fully opened in order to see the message. Generally this type of advertising is shown in physical media such as magazines and newspapers, being the first most common. This strategy allows captivating the attention of the reader to make him think exclusively about what is being promoted, since there is no different distractor.
Answer:
D) transnational strategy.
Explanation:
A transnational strategy is more personalized or custom fit than other global or international strategies. When corporations follow this approach, they will generally coordinate the subsidiary's operations with the headquarters, and will work closely together. Generally it focuses on marketing and operational activities, e.g. international retail stores.
