Why Would Managers Use the Accounting Rate of Return to Evaluate

question 134

Multiple Choice

Why would managers use the accounting rate of return to evaluate potential investment projects?

• A) It does not consider the time value of money.
• B) Bonuses to managers may be based on accounting income and/or return on assets.
• C) It serves as a screening measure to ensure that new investments do affect key financial ratios.
• D) Debt contracts require that a company maintain certain ratios that are not affected by income and long-term asset levels.

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