Question

which of the following capital budgeting methods focuses on net income rather than cash flows? multiple choice payback period accounting rate of return net present value internal rate of return

Answer 1

The Accounting Rate of Return (ARR) is the capital budgeting method that focuses on net income rather than cash flows.

Step-by-step explanation:

The capital budgeting method that focuses on net income rather than cash flows is the Accounting Rate of Return (ARR). Unlike the Payback Period, Net Present Value (NPV), or Internal Rate of Return (IRR) methods, which focus on cash flows, ARR calculates the return on investment by measuring profits expected from a project as a percentage of its average investment. This method uses accounting information from financial statements and does not consider the time value of money, highlighting the profit generated by the investment rather than the cash inflow.