Which of the Following Is a Weakness of the Accounting

question 21

Multiple Choice

Which of the following is a weakness of the accounting rate of return?

• A)It does not consider profit projections.
• B)It does not consider the time value of money.
• C)It ignores cash flows after the end of its useful life.
• D)It ignores the amount of revenues and expenses the project may generate.

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Definitions:

Crowding out

A situation in economics where increased government spending displaces private sector spending, either through higher taxes, higher interest rates, or borrowing.

Government Expenditures

The spending by the government sector on goods and services, including public services and public investment.

Multiplier

An economic factor that quantifies the effect of a change in fiscal or monetary policy on the overall economy, such as how an increase in government spending can lead to a larger increase in national income.

Crowding out

A situation where increased government spending leads to reduced investment in the private sector due to higher interest rates or competition for resources.