The average accounting return is defined as the:
A) Present value of a project's cash flows divided by the average book value of the project's assets.
B) Present value of a project's cash flows divided by the initial investment in the project.
C) Net income derived from a project divided by the initial investment in the project.
D) Average net income derived from a project divided by the initial investment in the project.
E) Average net income derived from a project divided by the average book value of the project's fixed assets.

Question

Quizplus · Accepted Answer

The average accounting return is calculated by dividing the average net income derived from a project by the average book value of the project's fixed assets. This method focuses on accounting measures of profit relative to book values of investment rather than cash flows or market values.

The Average Accounting Return Is Defined as The