What investment decision method takes the average profit and expresses it as a percentage of the average investment?

Question

Quizplus · Accepted Answer

The accounting rate of return takes the average profit and expresses it as a percentage of the average investment. It is a useful method for comparing investment opportunities when the size or timing of cash flows may vary. Option B, net present value, calculates the present value of future cash flows compared to the initial investment. Option C, payback period, measures the amount of time it takes to recoup the initial investment. Option D, internal rate of return, calculates the discount rate at which the net present value of an investment equals zero. While all of these methods can be valuable for investment decision making, A is the best choice for this particular question.

What Investment Decision Method Takes the Average Profit and Expresses