The capital acquisitions ratio is often calculated as a multi-year average because of the volatility of:
A) cash flow from year to year.
B) property, plant, and equipment expenditures from year to year.
C) net income from year to year.
D) inventory investment.

Question

Quizplus · Accepted Answer

The capital acquisitions ratio measures a company's ability to invest in property, plant and equipment, which can be a significant expense. This expenditure can vary greatly from year to year depending on the company's needs, making it volatile. Therefore, it is often calculated as a multi-year average to give a more accurate representation of the company's ability to make these types of investments.

The Capital Acquisitions Ratio Is Often Calculated as a Multi-Year