Which of the following statements provide(s)an argument in favour of including only a plant's net book value rather than gross book value as part of operating assets in the ROI computation?
I.Net book value is consistent with how plant and equipment items are reported on a balance sheet.
II.Net book value is consistent with the computation of operating income,which includes amortization as an operating expense.
III.Net book value allows ROI to decrease over time as assets get older.
A) I only.
B) III only.
C) I and II only.
D) I and III only.

Question

Quizplus · Accepted Answer

I and II are correct because net book value reflects the current value of the asset after accounting for depreciation or amortization, aligning with the balance sheet presentation and the computation of operating income, which includes depreciation or amortization expenses. III is not a valid argument in favor of using net book value for ROI computations, as the goal of ROI is to measure performance, not to reflect the aging of assets.

Which of the Following Statements Provide(s)an Argument in Favour of Including