The accounting rate of return uses non-cash flow factors including depreciation in calculating the operating income of the asset.

Question

Quizplus · Accepted Answer

The accounting rate of return (ARR) is a non-cash flow method of capital budgeting that calculates the average annual operating income as a percentage of the initial investment. It takes into account factors such as depreciation, which is a non-cash expense, in determining the operating income. Therefore, the statement is true.

The Accounting Rate of Return Uses Non-Cash Flow Factors Including