In calculating the rate of return on average investment, average investment should be calculated as (beginning book value + ending book value)/2.

Question

Quizplus · Accepted Answer

The rate of return on average investment is calculated as the profit or loss divided by the average investment. The average investment is calculated as (beginning book value + ending book value)/2. This takes into account any changes in the investment over the period and provides a more accurate picture of the return on investment.

In Calculating the Rate of Return on Average Investment, Average