The accounting rate of return (ARR):
A) Is synonymous with the internal rate of return (IRR).
B) Focuses on accrual-basis income numbers rather than after-tax cash flows.
C) Generally provides a good estimate of a project's IRR.
D) Explicitly recognizes the time value of money.
E) Can be used to choose between mutually exclusive projects.

Question

Quizplus · Accepted Answer

The accounting rate of return (ARR) focuses on accrual-basis income numbers rather than after-tax cash flows. It does not explicitly recognize the time value of money, and it may not provide a good estimate of a project's IRR. Additionally, it cannot be used to choose between mutually exclusive projects.

The Accounting Rate of Return (ARR)