The return generated by an investment based on its operating income is the

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The return generated by an investment based on its operating income is called the accounting rate of return (ARR). This measure evaluates the profitability of an investment by dividing the average annual operating income by the initial investment cost. The internal rate of return (IRR) is the rate at which the net present value of an investment becomes zero. The discounted rate of return is the rate used to discount future cash flows to their present value. The payback period is the amount of time it takes for an investment to pay back its initial cost through its cash inflows. None of these measures specifically focus on the operating income of an investment.

The Return Generated by an Investment Based on Its Operating