Which of the following statements about the accounting rate of return method is/are correct?
i.It is a simple way of screening investment proposals
ii.It is used by some managers because they believe this method parallels financial accounting statements.
iii.It is more accurate than the payback method because it considers the time value of money.

Question

Quizplus · Accepted Answer

The accounting rate of return method is a simple way of screening investment proposals and it is used by some managers because they believe this method parallels financial accounting statements. However, it does not consider the time value of money, which means that it is not as accurate as other methods such as net present value or internal rate of return. Therefore, only statement i and ii are correct.

Which of the Following Statements About the Accounting Rate of Return