Which three of the following accurately relate to the accounting rate of return?
A) It is the ratio of accounting profit to investment, expressed as a percentage.
B) It makes no allowance for the time value of money.
C) It is calculated and is required by managers because they are often judged retrospectively by this measure.
D) It is calculated more often than payback, NPV, or IRR during project appraisal by UK firms.

Question

Quizplus · Accepted Answer

The accounting rate of return (ARR) is the ratio of accounting profit to investment, expressed as a percentage (A). It does not consider the time value of money (B). Managers often use it as they are judged on accounting profits, making it a retrospective measure (C). However, it is not calculated more often than payback, NPV, or IRR in project appraisals (D).

Which Three of the Following Accurately Relate to the Accounting