A major shortcoming in the use of accounting rate of return as a method of project evaluation is that it ignores the time value of money.

Question

Quizplus · Accepted Answer

Accounting rate of return does not consider the time value of money, which means it does not account for the fact that money has greater value in the present than in the future due to inflation and the potential for investment returns. As a result, this method may lead to inefficient and inaccurate decision-making.

A Major Shortcoming in the Use of Accounting Rate of Return