What is a disadvantage associated with the use of the accounting rate of return method for assessing investment opportunities?

Question

Quizplus · Accepted Answer

The accounting rate of return method is based on an accrual approach, which means it may not reflect the actual cash flows associated with an investment. It also ignores the time value of money, meaning that it does not take into consideration the fact that money received in the future is worth less than money received today due to inflation and other factors. These limitations make it a less effective tool for assessing investment opportunities.

What Is a Disadvantage Associated with the Use of the Accounting