Accrual accounting rate of return is calculated by dividing ________.
A) net initial investment by an increase in expected average annual after-tax operating income
B) an increase in expected average annual after-tax operating income by the net initial investment
C) an increase in expected average annual cash flow by the net initial investment
D) net initial investment by an increase in expected average annual cash flow

Question

Quizplus · Accepted Answer

Accrual accounting rate of return is calculated by dividing the increase in expected average annual after-tax operating income by the net initial investment. This method of calculation factors in non-cash expenses such as depreciation and amortization, and is often used to evaluate investments that will generate income over multiple years.

Accrual Accounting Rate of Return Is Calculated by Dividing ________