Which of the following is not a weakness of the accounting rate of return?
A)It does not consider cash flows.
B)It does not consider the time value of money.
C)The discount rate used in the calculation may change over the life of the investment.
D)All of these answer choices are weaknesses of the accounting rate of return.

Question

Quizplus · Accepted Answer

A and B are well-known weaknesses of the accounting rate of return, but C is not a weakness of it. The accounting rate of return uses an average accounting profit during the life cycle of the investment, which does not involve a discount rate that could change over time.

Which of the Following Is Not a Weakness of the Accounting