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:

Assets

Economic resources owned by a business or individual that are expected to benefit future operations.

Expenses

Financial outlays or obligations incurred by a company as part of its operational activities, leading to a reduction in owners' equity.

Compound Entry

An accounting entry that involves more than two accounts, where there are multiple debits and/or credits in a single transaction.

Trial Balance

A financial worksheet that consolidates all ledger balances into debit and credit columns, verifying the mathematical accuracy of a company's accounting system.