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    Accounting Rate of Return

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    Neeraj Dharia
    Accounting rate of return (ARR) is a financial ratio used to evaluate capital investments that does not consider the time value of money. ARR calculates the return generated from a project's net income divided by its total capital cost. A higher ARR percentage means the investment is more attractive, with projects earning equal to or above the required rate accepted and below rejected.

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    Accounting Rate of Return

    Uploaded by

    Neeraj Dharia
    99 views1 page
    Accounting rate of return (ARR) is a financial ratio used to evaluate capital investments that does not consider the time value of money. ARR calculates the return generated from a project's net income divided by its total capital cost. A higher ARR percentage means the investment is more attractive, with projects earning equal to or above the required rate accepted and below rejected.

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    Accounting rate of return (ARR) is a financial ratio used to evaluate capital investments that does not consider the time value of money. ARR calculates the return generated from a project's net income divided by its total capital cost. A higher ARR percentage means the investment is more attractive, with projects earning equal to or above the required rate accepted and below rejected.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    99 views1 page

    Accounting Rate of Return

    Uploaded by

    Neeraj Dharia
    Accounting rate of return (ARR) is a financial ratio used to evaluate capital investments that does not consider the time value of money. ARR calculates the return generated from a project's net income divided by its total capital cost. A higher ARR percentage means the investment is more attractive, with projects earning equal to or above the required rate accepted and below rejected.

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    Attribution Non-Commercial (BY-NC)
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    Accounting rate of return

    Accounting rate of return, also known as the Average rate of return, or ARR is a financial
    ratio used in capital budgeting. [1] The ratio does not take into account the concept of time
    value of money. ARR calculates the return, generated from net income of the proposed
    capital investment. The ARR is a percentage return. Say, if ARR = 7%, then it means that the
    project is expected to earn seven cents out each dollar invested. If the ARR is equal to or
    greater than the required rate of return, the project is acceptable. If it is less than the desired
    rate, it should be rejected. When comparing investments, the higher the ARR, the more
    attractive the investment.[2]

    Basic formulae

    where

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