3.7.8 Investment

What is the primary objective of investment appraisal?

• To increase the company's market share

• To decide which projects to invest in for the best, fastest, least risky return

• To reduce the company's operational costs

• To expand the company's product line

Which of the following is NOT a method used to help businesses answer investment questions?

• Average rate of return

• Payback period

• Net present value calculation

• Gross profit margin

What does the Average Rate of Return (ARR) compare?

• Net return with the level of investment

• Gross profit with the level of investment

• Net return with the total revenue

• Gross profit with the total revenue

How is the Average Rate of Return (ARR) expressed?

• As a fraction

• As a percentage

• As a ratio

• As a decimal

What is the formula for calculating the payback period?

• Amount invested / Annual net return

• Annual net return / Amount invested

• Total revenue / Total costs

• Total costs / Total revenue

Which of the following is an advantage of the Average Rate of Return (ARR)?

• It ignores the timing of cash flows

• It is easy to calculate and understand

• It ignores cash flow after payback

• It ignores the time value of money

Which of the following is a disadvantage of the Payback Period?

• It is easy to calculate and understand

• It takes account of all the project's cash flows

• It ignores the time value of money

• It is very good for high-tech projects

How can industrial relations influence investment decisions?

• By increasing the cost of raw materials

• By affecting the number of jobs and productivity

• By improving corporate image and loyalty

• By reducing the risk of new investments

Why can't businesses rely completely on their predictions?

• Predictions are always accurate

• Predictions are based on assumptions that may change

• Predictions are based on historical data

• Predictions are influenced by government policies

What are investment criteria?

• Factors that determine the success of a marketing campaign

• Factors that influence the decision to invest in a project

• Factors that affect the production process

• Factors that determine employee satisfaction