The accounting rate of return is calculated as:
A)The annual after-tax income divided by the total investment.
B)The annual after-tax income divided by the annual average investment.
C)The annual cash flows divided by the annual average investment.
D)The annual cash flows divided by the total investment.
E)The annual average investment divided by the after-tax income.

Question

Quizplus · Accepted Answer

The accounting rate of return is calculated by dividing the annual after-tax income by the annual average investment. This measure is often used by companies to evaluate potential investment opportunities and assess their profitability.

The Accounting Rate of Return Is Calculated As