5.3 Average Rate of Return Flashcards
1
Q
Define Business Investment
A
Money that is used to purchase an asset that is expected to generate a return of income or profit.
2
Q
What are the types of Business Investment?
A
Land & Buildings
Machinery
Vehicles
3
Q
Define Average Rate of Return
A
In order to compare and choose between 2 projects, the average annual return (profit) from an investment/project.
4
Q
Formula for Average Rate of Return
A
(Average annual profit / Cost of investment) x 100
5
Q
Formula for Average Annual Profit
A
Total profit / Number of years
