Which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment (ROI) computations?
A) It is consistent with the computation of net operating income, which includes depreciation as an operating expense.
B) It is consistent with the balance sheet presentation of plant and equipment.
C) It eliminates the age of equipment as a factor in return on investment (ROI) computations.
D) It discourages the replacement of old, worn-out equipment because of the dramatic, adverse effect on return on investment.

Question

Quizplus · Accepted Answer

Using the gross cost of plant and equipment in ROI computations removes the impact of depreciation and thus the age of the equipment, making comparisons more consistent regardless of how old the equipment is.

Which of the Following Would Be an Argument for Using