Asked by WORST NIGHTMARE on Jul 15, 2024
Verified
The accounting rate of return (ARR)is computed by dividing a project's after-tax net income by the amount of the initial investment.
Accounting Rate of Return
A financial ratio that measures the return on investment from assets, indicating the efficiency of generating profits from its resources.
After-Tax Net Income
The amount of income that remains after all applicable taxes have been subtracted from the total revenue.
Initial Investment
The original sum of money used to start a business venture or investment.
- Evaluate the significance of the accounting rate of return (ARR) and identify its disparities with methodologies focused on cash flow analysis.
Verified Answer
LH
Louie HelsenJul 17, 2024
Final Answer :
False
Explanation :
The accounting rate of return (ARR) is computed by dividing the average after-tax net income of the project by the average investment. The initial investment is not the only consideration in computing ARR.
Learning Objectives
- Evaluate the significance of the accounting rate of return (ARR) and identify its disparities with methodologies focused on cash flow analysis.