Why Would a Company Use the Accounting Rate of Return

question 36

Multiple Choice

Why would a company use the accounting rate of return?

• A)to ensure that a new investment will not adversely affect accounting income
• B)because it does not consider the time value of money
• C)because it is a measure of liquidity
• D)all of the above

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Definitions:

Investment Committee

An investment committee is a group of professionals responsible for making decisions regarding the investment strategy of an organization or fund.

Passively Managed

Investment strategies that aim to replicate the performance of a specific index or benchmark as closely as possible, without active decision-making by managers.

Equity Index

A benchmark that represents the performance of a group of stocks, indicating the overall trend in the equity market.

Portfolio Manager

A professional responsible for making investment decisions and overseeing a portfolio of assets to achieve the investor's objectives.