Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which method of calculating return on investment (ROI) makes it easiest to compare different investments?

Using the payback period

Using percentage returns

Using the nominal value of investments

Using total dollar returns

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Verified step by step guidance

Understand the concept of Return on Investment (ROI): ROI is a financial metric used to evaluate the efficiency or profitability of an investment. It is typically expressed as a percentage and calculated using the formula: ROI = ((Net Profit / Investment Cost) × 100).

Analyze the options provided: The payback period measures the time it takes to recover the initial investment, but it does not account for profitability or percentage returns. Nominal values and total dollar returns provide absolute figures but do not allow for easy comparison across investments of different sizes.

Recognize why percentage returns are ideal for comparison: Percentage returns standardize the ROI calculation, making it easier to compare investments of varying scales or costs. For example, a $10,000 investment yielding $2,000 profit has the same ROI percentage as a $100,000 investment yielding $20,000 profit.

Consider the advantages of percentage returns: They provide a clear and proportional measure of profitability, allowing investors to assess which investment generates the highest return relative to its cost.

Conclude that using percentage returns is the most effective method for comparing different investments, as it provides a normalized metric that is independent of the investment's size or nominal value.