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 and only when it is equal to zero.

Question

Quizplus · Accepted Answer

The average accounting return (AAR) method is used to evaluate the profitability of an investment. An investment is considered acceptable if its AAR exceeds a predetermined target AAR, indicating that the investment is expected to generate returns above the minimum threshold set by the company or investor.

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