Explain demerits of accept-reject criteria, Financial Management

Assignment Help:

Q. Explain demerits of accept-reject criteria?

Demerits of ARR:-

(i) It utilizes accounting income rather than cash flows: - The principal short coming of ARR schema is that it uses accounting income instead of cash flows received from a project. Cash profits are higher than accounting income because cash profits are able to be reinvested during the life of the project itself.

(ii) Time Value of funds not considered: - The subsequent principal short coming of ARR approach is that it doesn't take into account the time value of money. Earning of all the years throughout the life time of the project is given equal weight-age under this method.

(iii) Complex to Fix a Pre-Determined Rate: - It is extremely difficult to fix a pre-determined rate of return with which the actual ARR is compared.


Related Discussions:- Explain demerits of accept-reject criteria

Determine the limitations of the traditional approach, Determine the Limita...

Determine the Limitations of the traditional approach Limitations of the traditional approach were not entirely based on treatment or emphasis of different aspects. In other wo

Financial ratio analysis, 1. Calculate the compound average annual growth r...

1. Calculate the compound average annual growth rate in sales and profit after tax

Brixton plans to sell the applicable computer, Brixton Products is consider...

Brixton Products is considering the purchase of a new $520,000 computer-based entry order system.  The cost of the system will be depreciated on a straight-line basis over its five

Define the safety and soundness implications of mergers, Define the safety ...

Define the safety and soundness implications of mergers? A: No. All mergers need regulatory approval and are subject to intense examination through regulators. If anything, the r

First, how do you calculate the current ratio

how do you calculate the current ratio

The relationship between futures price and cash price, The Relationship bet...

The Relationship between Futures Price and Cash Price Any commodity that can be bought in the market has a price, which is referred to as cash or spot price for immediate deliv

Reasons for growth of hedge funds, Reasons for Growth of Hedge Funds Ma...

Reasons for Growth of Hedge Funds Many Hedge Fund strategies have the ability to generate positive returns in both rising and falling equity and bond markets. Inclusion of Hedg

What is business combinations, Q. What is Business Combinations? Combin...

Q. What is Business Combinations? Combining of two entities. Under PURCHASE METHOD OFACCOUNTING, one entity is deemed to attain another and there is a new basis of accountingfo

Explain the disadvantages of ifrs 8, Disadvantages of IFRS 8 Recon...

Disadvantages of IFRS 8 Reconciliations may be time consuming. Less comparable with other organisations, as every entity has a different way of running their business.

Calculating investment statistics and graphing output, Step 1) Opportunity ...

Step 1) Opportunity Set Graph:Combine 2 of your stocks (Ignore the other 2 stocksfor this step only).  Construct an investment opportunity set (the curved set) between the two risk

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd