The investment decision method which takes the average profit and expresses it as a percentage of the average investment is:

Question

Quizplus · Accepted Answer

The accounting rate of return is a simple method that calculates the average profit generated by an investment as a percentage of the average investment made. It does not take into consideration the time value of money and is based on accounting figures rather than cash flows. Therefore, it is not as accurate as other investment decision methods such as the internal rate of return or net present value. However, the accounting rate of return can be useful in providing a quick assessment of the profitability of an investment and is often used as a preliminary screening tool.

The Investment Decision Method Which Takes the Average Profit and Expresses