Table of Contents
What are the advantages of average rate of return method?
Eliminates Outlying Statistics. Because it relies on averages, the average rate of return method eliminates outlying statistics in sets of data. This is especially useful in long-term averages, where many years of gains can minimize the impact of a single year of losses.
Which is not an advantage of average rate of return method Mcq?
AAR does not account for investment risk but helps determine the attractiveness of a potential investment.
What is one of the disadvantages of using the average rate of return method?
According to Corporate Finance Institute, the biggest drawback in using the average accounting return method is it does not take into account the time value of money. This is the concept that money is worth a known amount today, but there is no certainty what the same amount of money will be worth in the future.
Which of the following is a disadvantage of the accounting rate of return method?
b. The main disadvantage with the accounting rate of return-method is that it uses accounting numbers (instead of cash-flows) and does not consider the accounting profit
What are the advantages of ARR method?
Advantages2It is easy to calculate and understand the payback pattern over the economic life of the project3It shows the profitability of an investment and helps to measure the current performance of the project3 more rowsx26bull;26-Aug-2021
What are the advantages and disadvantages of the average accounting return?
Advantages; It is easier to calculate than other capital budgeting decision rules. It only needs net income data and book values of the investment during its life. Another advantage is needed information will usually be available. Disadvantage; it does not take time value of money into account.
What are the disadvantages of average rate of return?
According to Corporate Finance Institute, the biggest drawback in using the average accounting return method is it does not take into account the time value of money. This is the concept that money is worth a known amount today, but there is no certainty what the same amount of money will be worth in the future.
Which is not an advantage of average rate of return method?
The correct answer is d. It takes into consideration the time value of money. This method disregards the time value of money.
Which is not an advantage of the average rate of return method?
The correct answer is d. It takes into consideration the time value of money. This method disregards the time value of money.
What are the advantages and disadvantages of average rate of return?
Eliminates Outlying Statistics. Because it relies on averages, the average rate of return method eliminates outlying statistics in sets of data. This is especially useful in long-term averages, where many years of gains can minimize the impact of a single year of losses.
What are the disadvantages of ARR method?
Disadvantages of the accounting rate of return Unlike other methods of investment appraisal, the ARR is based on profits rather than cashflow. It is affected by subjective, non-cash items such as the rate of depreciation you use to calculate profits. The ARR also fails to take into account the timing of profits
Which of the following is a disadvantage of accounting rate of return?
Advantages2It is easy to calculate and understand the payback pattern over the economic life of the project3It shows the profitability of an investment and helps to measure the current performance of the project3 more rowsx26bull;26-Aug-2021
What are the major disadvantages of the use of the internal rate of return method of analyzing capital investment proposals?
(a) ARR ignores the time value of money. The primary weakness of the average return method of selecting alternative uses of funds is that the time value of funds is ignored. (b) Unlike other methods of investment appraisal, the ARR is based on profits rather than cashflow.
What are the advantages and disadvantages of accounting rate of return method?
Advantages2It is easy to calculate and understand the payback pattern over the economic life of the project3It shows the profitability of an investment and helps to measure the current performance of the project3 more rowsx26bull;26-Aug-2021
What is the main disadvantage of the annual rate of return method?
A disadvantage of the yearly rate of return is that it only includes one year and does not consider the potential for compounding over many years.
Which of the following is not an advantage of the accounting rate of return?
The correct answer is d. It takes into consideration the time value of money. This method disregards the time value of money.
Which of the following is a disadvantage of the internal rate of return criterion?
Disadvantage: Ignores Size of Project A disadvantage of using the IRR method is that it does not account for the project size when comparing projects. Cash flows are simply compared to the amount of capital outlay generating those cash flows.
What are advantages and disadvantages of ARR?
The main advantage is that it is easy to understand. The higher the ARR, the more attractive the investment is. (a) ARR ignores the time value of money. The primary weakness of the average return method of selecting alternative uses of funds is that the time value of funds is ignored.
What are advantages and disadvantages of accounting rate of return?
Advantages2It is easy to calculate and understand the payback pattern over the economic life of the project3It shows the profitability of an investment and helps to measure the current performance of the project3 more rowsx26bull;26-Aug-2021
What are the disadvantages of accounting rate of return?
Disadvantages of the accounting rate of return Unlike other methods of investment appraisal, the ARR is based on profits rather than cashflow. It is affected by subjective, non-cash items such as the rate of depreciation you use to calculate profits. The ARR also fails to take into account the timing of profits
What are the advantages of average rate of return?
According to Corporate Finance Institute, the biggest drawback in using the average accounting return method is it does not take into account the time value of money. This is the concept that money is worth a known amount today, but there is no certainty what the same amount of money will be worth in the future.
Which among is the disadvantage of average rate and return method?
Advantages2It is easy to calculate and understand the payback pattern over the economic life of the project3It shows the profitability of an investment and helps to measure the current performance of the project3 more rowsx26bull;26-Aug-2021
What are the advantages and disadvantages of using ARR?
Advantages2It is easy to calculate and understand the payback pattern over the economic life of the project3It shows the profitability of an investment and helps to measure the current performance of the project3 more rowsx26bull;26-Aug-2021
What are the common disadvantages of the usage of accounting earnings in the project evaluation process?
A disadvantage of the yearly rate of return is that it only includes one year and does not consider the potential for compounding over many years.
What is the advantage of using ARR?
Disadvantages of Payback Period
- Only Focuses on Payback Period.
- Short-Term Focused Budgets.
- It Doesn’t Look at the Time Value of Investments.
- Time Value of Money Is Ignored.
- Payback Period Is Not Realistic as the Only Measurement.
- Doesn’t Look at Overall Profit.
- Only Short-Term Cash Flow Is Considered.
