How does the accounting rate of return differ from the return on investment formula?
A. The denominator in each formula differs; accounting rate of return divides net operating income by initial investment, while return on investment divides net operating income by average invested assets.
B. They are not different; both are calculated by dividing net operating income by initial investment.
C. The numerator in each formula differs; accounting rate of return divides net operating income by average invested assets, while return on investment divides gross operating income by average invested assets.
D. The numerator in each formula differs; accounting rate of return divides net operating income by initial investment, and return on investment divides gross operating income by initial investment.
Answer: A
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