Question

Managers may use the accounting rate of return to evaluate potential investment projects because

a.debt contracts require that a firm maintain certain ratios that are affected by income and long-term asset levels.

b.it can be tied to the manager's personal income.

c.it serves as a screening measure to insure that new investments do not affect key financial ratios.

d.bonuses to managers may be based on accounting income and/or return on assets.

e.All of these choices are correct.

Answer 1

Option E

Accounting rate of return is used by managers to evaluate potential investment projects because of all the options given. So option E is the answer