nadz_k
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Financial Management Quiz on Accounting Rate of Return, created by nadz_k on 04/05/2013.

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Accounting Rate of Return

Question 1 of 3

1

What is the accounting rate of return?

Select one of the following:

  • the rate of return given at the end of the accounting period

  • the ratio of the accounting profit to the investment in the project

Explanation

Question 2 of 3

1

What is the formula?

Select one of the following:

  • Profit / Income X 100

  • Profit for the year / Asset book value at the start of the year X 100

Explanation

Question 3 of 3

1

What are the limitations of the accounting rate of return?

Select one or more of the following:

  • It is the most favored method for investment appraisal

  • Fails to take in to account the time value of money

  • Profit figures are poor substitutes of cash flow

  • The number of alternative ARR calculations can be continued beyond the three possibilities

  • This method is more accurate and reliable in comparison to NPV

Explanation

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