Which of the following is the ONLY capital budgeting method which uses accrual accounting information?

Question

Quizplus · Accepted Answer

The accounting rate of return is the only capital budgeting method that uses accrual accounting information in its calculation. It measures the profitability of an investment as the average annual profit over the investment's life divided by the initial investment. The other methods, such as the internal rate of return and net present value, use cash flow information instead. The payback period measures the amount of time it takes for an investment to recover its initial cost, and does not take into account future profitability beyond the payback period.

Which of the Following Is the ONLY Capital Budgeting Method