Answer:
The answer is significantly.
Explanation:
Oligopoly is a market situation in which there are few sellers, selling similar goods and services and many buyers. The barriers to entry in this market in high. Example of a oligopoly market is OPEC.
The competition amongst the few sellers is high because they are selling the same thing and a change in price by one firm will significantly affect other firms in the industry. For example, if a firm reduces the price of its goods, this creates a price war and other firms to start reducing their price to match the lower price. And if another firm increases its price, consumers will switch to competitors
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.
Double taxation is occurs when income taxes<span> are paid twice on the same source of </span>earned income. The income can be taxed at both the corporate level and personal level.<span>
</span><span>Dividends as a source of investor income is susceptible to double taxation.</span>