Evaluate the advantages of using the accounting rate of return (ARR) in investment appraisal.
Understand the Problem
The question is asking to evaluate the advantages of using the Accounting Rate of Return (ARR) in investment appraisal. It provides four options that describe potential advantages of ARR.
Answer
ARR is easy to calculate and understand.
The ARR is easy to calculate and understand.
Answer for screen readers
The ARR is easy to calculate and understand.
More Information
The main advantage of ARR is its simplicity; it requires basic accounting information and delivers a quick profitability estimation.
Tips
A common mistake is assuming ARR considers the time value of money, which it doesn't.
Sources
- What Is Accounting Rate of Return (ARR)? - Investopedia - investopedia.com
- Advantages and Disadvantages of Accounting Rate of Return - javatpoint.com
- What Are The Benefits Of Using Accounting Rate Of Return For Capital Evaluation - fastercapital.com
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