The Accounting Rate of Return Method for Evaluating Proposed Investments

question 56

Multiple Choice

The accounting rate of return method for evaluating proposed investments:

• A)is based on cash receipts and disbursements related to the investment.
• B)uses accounting net income from the operating budget.
• C)does not recognize the time value of money.
• D)is easier to use than the net present value method.

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Definitions:

Investment Spending

Expenditures made for the purpose of acquiring new assets or upgrading existing ones to increase future productivity or revenue.

Transfer Payment

A payment of money (or goods and services) by a government to a household or firm for which the payer receives no good or service directly in return.

Subsidies

Financial support extended to an economic sector (or institution, business, or individual) with the aim of promoting economic and social policy objectives.

Wage Payments

The act of providing remuneration to employees for their labor, usually in the form of a monetary payment over a specified time period.