Acceptance rule of accounting rate of return or arr, Finance Basics

Acceptance Rule of Accounting Rate of Return or ARR

ARR procedure will accept those projects whose ARR is higher rather than that set with management or with bank rate and it will provide highest ranking to ventures along with highest ARR and vice versa.

Advantages

1. Simple to use and understand.

2. Readily calculated from accounting data therefore much easier to ascertain.

3. It is consistent along with profitability objectives as it analyses the return from complete inflows and like that it will provide a hint or a clue to the profitability of venture.

Disadvantages

1. It pays no attention to time value of money.

2. It does not seem how soon the investment should recover the cost like it is owner looking quite than creditor oriented approach.

3. It employs accounting profits instead of cash inflows some of that may not be realizable.

Posted Date: 1/31/2013 12:26:39 AM | Location : United States







Related Discussions:- Acceptance rule of accounting rate of return or arr, Assignment Help, Ask Question on Acceptance rule of accounting rate of return or arr, Get Answer, Expert's Help, Acceptance rule of accounting rate of return or arr Discussions

Write discussion on Acceptance rule of accounting rate of return or arr
Your posts are moderated
Related Questions
State about the Odd-lot Dealer He/she specializes in buying and selling in amounts which are less than present trading units. They buy and sell odd lots, make them up into ma

Preparing Contract Note in the Stock Exchange Clerk takes the details of the day's transaction to the broker at the end of working day. Broker scrutinizes all transactions o

Question: Suppose that a security is presently selling for a price of $65, the nominal interest rate is 8%, and the security volatility is 0.15. a) Determine Delta of a Euro

Advantages of Investment in Shares 1. Income in form of dividends When you contain shares of a company then you become a part-owner of such company and hence you will be

Risk-Return Trade-Off Most financial decisions comprise alternative courses of action. The choices have different returns and risk.  As like example, must we buy a replacement

Cost of capital: The cost of capital is a term related to the field of financial investment to refer to the cost of a company's funds (both equity and debt), from an investor'

Yard Stick Required in Ratio Analysis 1. Past performance of the company The company's previous performance past ratio is needed to gauge or measure the company's present

Question: (a) (i) Define the term multicollinearity. (ii) Explain why it is important to guard against multicollinearity. (b) (i) Sometimes we encounter missing value

what will happen to the loss on account of premium redemption of debenture through sinking fund? Where do i close this account to?

What is the Process of Investing in Securities ? There are several process of investing in securities:- (1) Finding a Broker (2) Selection of Brokers (3) Opening an Account w