The average accounting rate of return (AAR):
A) considers the time value of money.
B) measures net income as a percentage of the sales generated by a project.
C) is the best method of financially analyzing mutually exclusive projects.
D) is the primary methodology used in analyzing independent projects.
E) is similar to the return on assets ratio.

Question

The average accounting rate of return (AAR): 
A) considers the time value of money. 
B) measures net income as a percentage of the sales generated by a project. 
C) is the best method of financially analyzing mutually exclusive projects. 
D) is the primary methodology used in analyzing independent projects. 
E) is similar to the return on assets ratio.

Quizplus · Accepted Answer

The average accounting rate of return (AAR) is similar to the return on assets ratio as both measure the return generated on the investment in assets, but AAR specifically looks at the returns from a particular project or investment.

The Average Accounting Rate of Return (AAR)