Final answer:
The only option that is not a weakness of the Accounting Rate of Return (ARR) is (a) it is easy to compute, which is actually one of ARR's strengths.
Step-by-step explanation:
The question asks to identify the statement which is not a weakness of the Accounting Rate of Return (ARR). The Accounting Rate of Return is a financial metric used to measure the profitability of an investment, computed by dividing the average profit by the initial investment. The correct choice identifying a non-weakness of the ARR is (a) it is easy to compute. The ARR does have several weaknesses; however, its simplicity in calculation is not one of them. It is known for being straightforward and easy to compute, which is one of its strengths.
The weaknesses of the ARR include that it (b) does not directly consider cash flows, (c) it ignores the time value of money, and (d) it does not directly consider the timing of cash flows. These weaknesses suggest that, while useful for quick assessments, the ARR may not reflect the true value of an investment over time as it doesn’t account for when the returns are received and their true value in present terms.
Summing up the final answer:
- It is easy to compute is not a weakness of the ARR.
- ARR does not take into account the cash flows or the time value of money.
- ARR also overlooks the timing of cash flows, which can be critical for investment decision-making.