A Disadvantage Associated with the Use of the Accounting Rate

question 22

Multiple Choice

A disadvantage associated with the use of the accounting rate of return method for assessing investment opportunities is:

• A) it is a method that is not widely understood by business.
• B) it is based on an accrual approach rather than cash flows.
• C) it ignores the time value of money.
• D) B and C

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Definitions:

Competitive Market

A market structure where numerous producers compete to sell their goods or services to many buyers, leading to efficient pricing and innovation.

Market Price

The present cost at which a product or service is available for purchase or sale in the marketplace.

Net Marginal Revenue

The difference between the marginal revenue earned from selling an additional unit of a product or service and the marginal cost of producing that unit.

Wool Fabric

A textile material made from the natural fibers of sheep, known for its warmth, resilience, and ability to absorb moisture without feeling wet.