The accounting rate of return is not a true return because it simply utilises some average figures from the company's balance sheet and income statement.

Question

Quizplus · Accepted Answer

The accounting rate of return does not take into account the time value of money, the cost of capital, and other external factors that can affect returns. It simply relies on accounting figures, which can be manipulated, and therefore is not considered a true return measure.

The Accounting Rate of Return Is Not a True Return