The accounting rate of return is a measure of liquidity computed by dividing the average annual cash flows from an asset by the average amount invested in the asset.

Question

Quizplus · Accepted Answer

The accounting rate of return is actually a measure of profitability, not liquidity. It is computed by dividing the average annual income or profit earned from an asset by the average amount invested in the asset.

The Accounting Rate of Return Is a Measure of Liquidity