Which of the Following Is Not a "Con" of the Accounting

question 85

Multiple Choice

Which of the following is not a "con" of the Accounting Rate of Return method?

• A) The method makes no adjustment for the time value of money or project risk.
• B) The depreciation method used impacts both the numerator and denominator.
• C) It focuses on net income rather than a company's ability to generate cash.
• D) The choice of the hurdle rate is arbitrary.
• E) All of the above are cons of the Accounting Rate of Return method.

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Definitions:

Book Values

The net value of a company's assets, subtracting the total liabilities from the total assets.

Market Values

The value at which an asset is exchanged in a competitive auction scenario.

Market-To-Book Ratio

A financial ratio comparing a company's market value to its book value, used to assess valuation.

Market Price Per Share

The current price at which a share of stock can be bought or sold on the open market.