AICPA Exam CPA-Business Topic 2 Question 92 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 92
Topic #: 2

[All CPA-Business Questions]

The trough of a business cycle is generally characterized by:

AShortages of essential raw materials and rising costs.

BIncreasing purchasing power and increasing capital investments.

CUnused productive capacity and an unwillingness to risk investments.

DDeclining purchasing power and unused productive capacity.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. Return on investment equals net income divided by average invested capital:

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.

by Georgeanna at Jul 11, 2024, 09:35 PM

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Lindsey

2 months ago

Haha, I bet the exam writers are having a field day coming up with these tricky options. I'm sticking with D, it's the most 'troughy' choice in my opinion.

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Dorethea

1 months ago

I agree with you both, D does seem like the most 'troughy' option out of the choices.

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Delisa

1 months ago

I'm not sure, but C also seems like a possibility since there might be unused productive capacity during a trough.

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Misty

1 months ago

I think D is the best choice too, it makes sense for the trough of a business cycle.

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Fausto

3 months ago

B can't be right, that sounds more like the peak of the cycle. I'm going with C, it just makes the most sense.

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Jestine

1 months ago

Unused productive capacity and an unwillingness to risk investments does seem to fit the description of the trough.

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Laquanda

1 months ago

I agree, C seems like the best choice for the characteristics of the trough of a business cycle.

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Karan

1 months ago

I think B is incorrect too, it does sound more like the peak. C does make more sense for the trough.

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Albina

3 months ago

D seems like the correct answer. Declining purchasing power and unused productive capacity are the hallmarks of a trough.

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Shelia

3 months ago

Yes, that's right. It's a sign that the economy is not doing well during that phase of the business cycle.

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Lillian

3 months ago

I agree, D is the correct answer. It makes sense that declining purchasing power and unused capacity would be characteristic of a trough.

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Domitila

3 months ago

I think the answer is C. Unused productive capacity and an unwillingness to risk investments definitely sounds like the trough of a business cycle to me.

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