How Does the Accounting Rate of Return Differ from the Return

question 120

Multiple Choice

How does the accounting rate of return differ from the return on investment formula?

• A)They are not different;both are calculated by dividing net operating income by initial investment.
• B)The numerator in each formula differs;accounting rate of return divides net operating income by initial investment,and return on investment divides gross operating income by initial investment.
• C)The numerator in each formula differs;accounting rate of return divides net operating income by average invested assets,while return on investment divides gross operating income by average invested assets.
• D)The denominator in each formula differs;accounting rate of return divides net operating income by initial investment,while return on investment divides net operating income by average invested assets.

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