An investment is acceptable if its average accounting return (AAR):
A) Is less than a target AAR.
B) Exceeds a target AAR.
C) Exceeds the ﬁrm's return on equity (ROE).
D) Is less than the ﬁrm's return on assets (ROA).
E) Is equal to zero and only when it is equal to zero.

Question

Quizplus · Accepted Answer

An investment is acceptable if its AAR exceeds a target AAR, as this indicates that the investment is generating a return above the desired level. AAR is calculated as the average net income divided by the average book value of the investment.

An Investment Is Acceptable If Its Average Accounting Return (AAR)