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

Objective of corporate financing Corporate finance control is a division of financial that refers to the control of money of an organization. The attention of corporate financi

A 10m diameter circular tunnel is to be excavated in a jointed ground.  The joint sets spaced at 6m are dipping towards the West at 50°.  A horizontal circular tunnel is to be cons

Write short notes on the overcoming the following obstucal with good leblel diagram 1 RIVER 2.BUILDING 3.DAM

Q.  What do you mean by diffraction? Distinguish between Fresnel's and Fraunhofer's classes of diffraction. Ans. The phenomena of diffraction in case of light was first observ

I need some help

Write a detailed report under the theme "Legal Issues and Professional ethics in Engineering". Some of the topics that you can consider, but not limited to them, are as follow:

Engine fuel control systems: The thrust of a turbo jet is controlled by varying the amount of fuel that is burnt in the combustion system and in order to operate the safe tempe

why is only 1 lime and sod required for aluminium impurities

5. From the following details you are required to make an assessment of the average amount of working capital requirement of Hindustan Ltd. Particulars Average period of credit E