Accounting rate of return method, finance, Other Engineering

Accounting rate of return method
ARR method is also known as ‘Return on Investment Method’. Here accounting information as shown in the financial statement is the basis for measuring the profitability of an investment (I.M. Pandey, 2005).
Average Income
ARR = ________________________
Average Investment
Accept Reject Rule:
Accept if the projects ARR > Minimum Required Rate
Reject if the projects ARR < Minimum Required Rate (I.M. Pandey, 2005).
Merits:
1. Simple to understand and use
2. Readily calculated by referring to financial statements
3. Considered entire income in calculating the profitability
De-merits:
1. It uses accounting profits and not the cash flows in evaluating a project.
2. Time value of money is ignored as average income is taken (I.M. Pandey, 2005).
Posted Date: 2/6/2012 10:37:03 PM | Location : United States







Related Discussions:- Accounting rate of return method, finance, Assignment Help, Ask Question on Accounting rate of return method, finance, Get Answer, Expert's Help, Accounting rate of return method, finance Discussions

Write discussion on Accounting rate of return method, finance
Your posts are moderated
Related Questions
give a criticalanalysis of a zener diodedata with suitable chracteristicsand applications

Common faults - Fire safety management: Common faults found are: Combustible items left in protected routes Locked exits Fire doors wedged open Exits obstru

problem on dissociation constant

Given data for an F-4 (W=40000 lb, S=530 ft^2, Ta@sea level=35800 lb, Mach=1.5, h=20000 ft (std day), Cd0=.0224, k=.1516) find aircraft''s specific excess power in straight-and-lev


Ic Packages: Like transistors and other types of solid state components, IC's are mounted in packages, which protect them from moisture, dust and other types of contaminations.


Continuous Casting : In essential, the process consists of pouring molten metal into a short vertical metal die or mould (at a controlled rate), which is open at both ends, coolin

HI,I GOT ASSIGNMENTS TO TURN IN WITHIN 24 HOURS.PLEASE IS THERE ANYWAY YOU COULD HELP OUT?

two frames are not joint properly so create gap between two frames so material lick from this gap