CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

What are the advantages of the average accounting rate of return method?

I. It is easy to understand and simple to use.
II. It considers cash flows, not economic income.
III. It considers the time value of money.
IV. Any sunk costs are excluded from the rate calculation.
Correct Answer: I only

User Contributed Comments 4

User Comment
amamed213 why IV is not Ok ?
Renaud1807 We are asking about the advantages...
johntan1979 Check the formula... which part in the formula shows sunk costs are excluded?
khalifa92 AAR has NI which includes depreciation and other sunk costs
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