How does IRR compare to ROI?
ZTBL OG III Past Papers and Syllabus / All — Multiple-choice practice
آئی آر آر کا آر او آئی سے موازنہ کیسے ہوتا ہے؟
- A. Both measure profitability identically
- B. IRR is simpler to calculate
- C. ROI is more comprehensive
- D. IRR considers time value of money; ROI does not
Correct answer
IRR considers time value of money; ROI does not
Explanation
Explanation IRR considers the time value of money, while ROI does not. This making IRR a more accurate measure of profitability for investments with cash flows over time. IRR and ROI both measure profitability.
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