Accounting rate of return (arr), Financial Management

Assignment Help:

Accounting Rate of Return (ARR):

This technique relies on the rate of return every project will earn over its life. It takes the help of accounting profit while calculating the returns.  There are 2 methods of calculating ARR.

(i)                 On the basis of original investment,

1701_accounting rate of return.png

This technique of calculation was rejected on the ground that the original outlay is gradually recovered over the project life because of depreciation charge.

904_accounting rate of return1.png

When depreciation is to be taken on a straight-line basis and no salvage value is understood, the average investment is always equal to one-half of the original in- vestment, and the resulting rate of return is always two times the rate determined on the basis of original investment.


Related Discussions:- Accounting rate of return (arr)

Sales managers view on exchange risk, The sales manager considers that ther...

The sales manager considers that there will be substantial foreign exchange risk in trading with Werland. Payment is unpaid in Werland francs in three months time. The current ster

What is the meaning of financing decision, What is the meaning of Financing...

What is the meaning of Financing decision Financing decision of a firm relates to choice of the proportion of these sources to finance investment requirements.

Rate changes and duration estimate, To calculate duration, we need to...

To calculate duration, we need to first obtain the values for V - and V + where V - is the price when the yield decreases by certain number of basis points and V +

State the impact on profitability of the company, State the impact on profi...

State the impact on profitability of the company Everything you do has an impact on profitability of the company(including drinking ten cups of coffee in a day!). So if you wan

Introduction to mortgage-backed securities, A mortgage may be defined as a ...

A mortgage may be defined as a pledge of property to secure payment of a debt. Depending upon the terms of mortgage agreed upon between the lender and the borrower, mor

Management accounting and financial management, Q. Distinguish between Mana...

Q. Distinguish between Management Accounting and Financial Management with clear mention of basis of differences. How does the traditional financial manager differ from the mode

Explain the time value of money, What is the time value of money? The m...

What is the time value of money? The meaning of time value of money is that money you hold in your hand today is worth much more than money you suppose to receive in the future

Global equity indexes, Global Equity Indexes: As described earlier in t...

Global Equity Indexes: As described earlier in this chapter, there are several stock market indexes available which depict the performance of particular sectors and a country a

Noi approach, Two companies are identical in all aspects except in the debt...

Two companies are identical in all aspects except in the debt-equity profile. Company X has 14% debentures worth Rs. 25,00,000 whereas company Y does not have any debt. Both compan

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd