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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Define (a) return on investment, (b) risk, (c) financial flexibility, (d) liquidity, and (e) operating capability.

To determine

Define the following (a) return on investment, (b) risk, (c) financial flexibility, (d) liquidity, and (e) the operating capability.

Explanation

Financial accounting:

Financial accounting is the process of recognizing, summarizing, and reporting all financial transactions in the financial statement of the business for a period of time. The financial statements consist of the income statement, the statement of retained earnings, the balance sheet, and the cash flow statement.

(a) Return on Investment:

This financial ratio evaluates how efficiently the assets are used in earning income from operations. So, ROI is a tool used to measure and compare the performance of a units or divisions or a company.

(b) Risk:

Risk refers to the future uncertainty or unpredictability of the results...

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