Allyn Company owns 10% of the Cordon Company common stock. The economic return from investing ratio that Allyn calculates contains which of the following components?
A)Net income of the Cordon Company.
B)Market price of the Cordon company stock.
C)Capital gain from the Cordon investment.
D)Interest received on the Cordon investment.

Question

Quizplus · Accepted Answer

The economic return from investing ratio typically includes capital gains, which is the change in the market price of the stock over time. The net income of Cordon Company and the interest received on the investment do not contribute to the calculation of economic return from investing ratio. The market price of the stock may be used as a component in the calculation of the ratio, but it is not always necessary.

Allyn Company Owns 10% of the Cordon Company Common Stock