The accounting rate-of-return method is widely used to measure the estimated performance of a capital investment, primarily because it is very accurate.

Question

Quizplus · Accepted Answer

The statement is false. The accounting rate-of-return method has limitations and may not always provide accurate estimates of performance for capital investments. It does not consider the time value of money, inflation, and other factors that may affect the profitability of a project over time. Other methods, such as net present value and internal rate of return, may be more accurate in evaluating investment performance.

The Accounting Rate-Of-Return Method Is Widely Used to Measure the Estimated