The accounting rate of return differs from the internal rate of return and the payback period in that, the accounting rate of return does not focus on cash flows.

Question

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The Accounting Rate of Return (ARR) calculates the return on investment based on net income, not on cash flows, which distinguishes it from methods like Internal Rate of Return (IRR) and Payback Period that focus on cash flows.

The Accounting Rate of Return Differs from the Internal Rate