The Problem with the Accounting Rate of Return Is That

question 42

Multiple Choice

The problem with the accounting rate of return is that it fails to consider the:

• A)profitability of the project.
• B)life of the project.
• C)timing of cash flows.
• D)effect on net income.

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Definitions:

Countercyclical Stock

A stock whose performance is inversely related to the economy's performance, often doing well during economic downturns.

U.S. Treasury Bills

Short-term government securities issued at a discount from par value and mature in a year or less, representing a secure debt obligation of the US government.

Risk Level

A measure of the potential for loss in an investment or business venture.

Portfolio Variance

A measure of the dispersion of returns of a portfolio, indicating the degree of investment risk.