In relation to investment, how do you calculate average annual profits before finances and tax?

The correct answer is derived from the method of calculating average annual profits before financing costs and tax, which takes into account the overall profitability of the investment by considering cumulative sales, cumulative costs, and the impact of depreciation.

By using cumulative sales and cumulative costs, you ascertain the total revenues generated over a specific period juxtaposed against the total costs incurred. It's essential to remove depreciation from this equation because average annual profits aim to present a clearer picture of earnings by focusing solely on operational performance without the distortion that non-cash expenses like depreciation can cause. This gives a better reflection of the long-term profitability of an investment.

Therefore, the formula presented here captures the holistic view of profitability tied to investment performance, making it the most applicable calculation method for determining average annual profits before financing and tax considerations. The other options do not accurately reflect this comprehensive approach to evaluating investment profitability, focusing instead on elements that do not align with calculating average annual profits.