An Investment Is Acceptable If Its Average Accounting Return (AAR)

question 26

Multiple Choice

An investment is acceptable if its average accounting return (AAR) :

• A)is less than a target AAR.
• B)exceeds a target AAR.
• C)exceeds the firm's return on equity (ROE).
• D)is less than the firm's return on assets (ROA).
• E)is equal to zero.

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Definitions:

Compound Return

The process by which an investment grows over time as earnings from both the principal and the accumulated earnings from preceding periods.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used in statistics and finance to assess the volatility of an investment.

Investment

The allocation of resources, usually money, in order to generate income or profit.

Financial Markets

Marketplaces where buyers and sellers engage in trading of financial assets such as stocks, bonds, derivatives, and currencies.