The approach to capital budgeting which divides an accounting measure of income by an accounting measure of investment is the:

Question

Quizplus · Accepted Answer

The approach described in the question is the accrual accounting rate of return, which divides an accounting measure of income (such as net income or operating profit) by an accounting measure of investment (such as average book value or initial cost). Net present value and internal rate of return both use discounted cash flows rather than accounting measures, while the payback method focuses on the time it takes to recoup investment rather than profitability. Therefore, the best choice is D - accrual accounting rate of return.

The Approach to Capital Budgeting Which Divides an Accounting Measure