Accounting rate of return is the simplest capital budgeting method. It gives managers an estimate of how soon they will recover their initial investment.

Question

Quizplus · Accepted Answer

The accounting rate of return (ARR) measures the expected profitability of an investment, not the time it takes to recover the initial investment. The payback period method estimates how soon the initial investment will be recovered.

Accounting Rate of Return Is the Simplest Capital Budgeting Method