Only Accounting Rate of Return Ignores the Time Value of Money

question 56

True/False

Only accounting rate of return ignores the time value of money.

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Definitions:

Investment Centre

A segment or area of a business responsible for both its revenue and its investments.

Residual Income

The amount of income that exceeds the minimum rate of return or hurdle rate, often used in performance measurement.

Operating Assets

Assets that are used for the core operations of a business, necessary for creating goods or services to be sold.

Residual Income

Operating income that remains after deducting all required costs of capital from net operating profits, often used in performance measurement.