MENU
The accounting rate of return?
Suggested Answer: B
Get Premium CMA Questions
as Interactive Web-Based Practice Test or PDF
Real Exam Format
Detailed Explanations
Instant Access
Get Your Practice Test
The accounting rate of return (also called the unadjusted rate of return or book value rate of return) is calculated by dividing the increase in accounting net income by the required investment. Sometimes the denominator is the average investment rather than the initial irstment This method ignores the time value of money hand focuses on income as opposed to cash flows.
36 comments · newest first
AN
Antonio
10 months ago
D is misleading; it doesn't account for time value like IRR does.
FE
Felicitas
11 months ago
C is correct, they don’t align well at all.
FR
Francoise
11 months ago
Wait, does it really not consider cash flows? That seems off.
BR
Brinda
11 months ago
Totally agree with B! Cash flows are a different story.
YE
Yen
11 months ago
B is spot on! It really does focus on income.
GA
Gail
12 months ago
I think it’s related to return on investment, but I’m confused about how they measure performance differently.
ER
Erin
12 months ago
I feel like the accounting rate of return might not consider the time value of money, which seems important for investment decisions.
LA
Lavonda
12 months ago
I remember practicing a question where the accounting rate of return was compared to the internal rate of return, but I can't recall the details.
LE
Lewis
1 year ago
I think the accounting rate of return focuses on income rather than cash flows, but I'm not entirely sure.
IN
Ines
1 year ago
Okay, let me think this through. The accounting rate of return is about income, not cash flows. That's an important distinction to remember.
AS
Ashleigh
1 year ago
The key here is to focus on the differences between the accounting rate of return and other performance measures like the internal rate of return. I've got this.
FE
Felix
1 year ago
Hmm, I'm a bit unsure about the accounting rate of return. I'll need to review my notes on that.
IR
Ira
1 year ago
This question seems straightforward, I think I can handle it.
GU
Gussie
1 year ago
I'm a little confused by the options, but I'll try to eliminate the ones that don't seem to fit and make an educated guess.
IO
Iola
1 year ago
Ah, I think I've seen this type of attack before. Let me review the details and see if I can spot the right answer.
JA
Jaclyn
1 year ago
I'm a bit unsure about this one. Positioning the service ports correctly during installation is important, but I'm not 100% sure if they need to be facing downward.
MA
Marleen
1 year ago
I practiced a similar question where identifying failed authentications in the RADIUS logs was key. I think that's the best starting point.
TR
Tresa
1 year ago
I think the special file modes might be related to permissions, but I'm not entirely sure if they are the same as the usual read/write/execute.
DE
Delsie
2 years ago
I agree with Evangelina, the accounting rate of return does consider the time value of money.
EV
Evangelina
2 years ago
I see your point, but I think it also recognizes the time value of money.
VI
Viva
2 years ago
I disagree with that, I believe it is inconsistent with the divisional performance measure known as return on investment.
BI
Billy
2 years ago
I think the accounting rate of return focuses on income instead of cash flows.
BE
Bev
2 years ago
I think it's important to understand all aspects of the accounting rate of return, including how it relates to cash flows and the time value of money.
LA
Lawrence
2 years ago
I still think the accounting rate of return is more about income rather than cash flows. That's what I remember studying.
YU
Yuette
2 years ago
I agree with the last point, recognizing the time value of money is crucial in accounting calculations.
VI
Virgilio
2 years ago
I see where you're coming from, but I think the accounting rate of return actually recognizes the time value of money. It's an important factor to consider.
BR
Brent
2 years ago
I disagree, I believe the accounting rate of return is inconsistent with the divisional performance measure known as return on investment. It's a different concept.
AN
Annice
2 years ago
I think the accounting rate of return is similar to the internal rate of return. It focuses on income rather than cash flows.
ST
Stephane
2 years ago
B) Focuses on income as opposed to cash flows.
CO
Cortney
2 years ago
A) Is sonorous with the internal rate of return.
AL
Alex
3 years ago
I think option D is the one that's throwing me off the most. Recognizing the time value of money? Isn't that more of a consideration for discounted cash flow analysis, not the accounting rate of return?
AR
Armando
3 years ago
True, that option A is pretty funny. Sounds like the kind of thing an accountant would come up with to sound smart. I'm leaning more towards option B myself, but I'm curious to hear what the rest of you think.
LA
Lawrence
3 years ago
Haha, 'sonorous with the internal rate of return'? What does that even mean? I think option A is just trying to confuse us with fancy-sounding language.
DE
Dean
3 years ago
Option C seems interesting too. The accounting rate of return is supposed to be a way to measure divisional performance, so it should be consistent with the return on investment metric, right? I'm not sure about that one.
CH
Christiane
3 years ago
I agree, the accounting rate of return is not something we've covered in much detail in our study group. But I think option B might be the correct answer - it does focus on income rather than cash flows, which is a key distinction.
CA
Carri
3 years ago
Hmm, this seems like a tricky question. The accounting rate of return is a metric that I'm not too familiar with, so I'll have to think about this one.