The problem with the accounting rate of return is that it fails to consider the:

Question

Quizplus · Accepted Answer

The accounting rate of return only considers the average net income earned by the project compared to its initial investment, while ignoring the timing of cash flows. This means that even if a project generates a high average net income, if it takes a long time to recoup the initial investment or if the cash flows are not evenly distributed over the project's life, the accounting rate of return may not accurately reflect the project's profitability.

The Problem with the Accounting Rate of Return Is That