Y11 ARR Review

What is the purpose of the average rate of return calculation for businesses?

• To evaluate the profitability of potential investments

• To estimate the cash flows for investments

• To calculate the total cost of investments

• To track the market conditions for investments

How is the average rate of return calculated?

• Multiplying the total profit by the cost of the investment

• Dividing the total cost by the average annual profit

• Adding the total profit to the cost of the investment

• Dividing the total profit by the number of years

What is a limitation of the average rate of return calculation?

• It does not account for the time value of money

• It considers all market conditions for investments

• It accounts for the risks associated with investments

• It accurately predicts future profits for long-term investments

Why is the average rate of return calculation considered straightforward for businesses?

• It can be easily understood by investors with varying financial expertise

• It accounts for all market conditions

• It considers the time value of money

• It provides a long-term perspective on investment performance

What does the average rate of return calculation fail to consider?

• Cash flows and risks

• Market conditions and future profits

• Time value of money and estimation of future profits

• Total cost of investments

Why is it important for businesses to use the average rate of return calculation?

• To accurately predict future profits

• To make more informed investment decisions based on potential returns

• To track the market conditions for investments

• To estimate the cash flows for investments

What does the average rate of return calculation rely on for long-term investments?

• Estimation of future profits

• Total cost of investments

• Cash flows and risks

• Time value of money

What does the average rate of return calculation not account for?

• The market conditions for investments

• The total cost of investments

• The time value of money

• The estimation of future profits

What does the average rate of return calculation enable businesses to do?

• Calculate the total cost of investments

• Track the market conditions for investments

• Estimate the cash flows for investments

• Quickly compare the profitability of different investment options

What is the advantage of using the average rate of return calculation for businesses?

• It provides a long-term perspective on investment performance

• It accurately predicts future profits

• It accounts for all market conditions for investments

• It considers the time value of money