A disadvantage with the average accounting return is the accounting basis of the values used in the computation.

Average Accounting Return

A financial ratio that compares the average annual net income of an investment to its initial cost to assess its profitability.

Accounting Basis

The method in which income and expenses are recognized in the accounts; common methods include cash basis and accrual basis accounting.

Computation

The process of performing mathematical calculations or processing data using algorithms, often carried out by computers.