Accounting rate of return method or arr, Finance Basics

Accounting Rate of Return Method or ARR

This method utilizes accounting profits from financial status to assess the viability of investment proposal via diving the average income after tax via average investment.  The investment would be equivalent to the original investment in addition the salvage value divided with two or the initial investment divided with two or dividing the total of the investment book value after depreciating with the life of the project.  This method is known as also book value method or financial statement method.  The rate of return on asset method or adjusted rate of return method is given via:

ARR = ( Average income/ Average investment)    x 100 

or (Average income - Average depreciation)/Initial investment

Not like PBP, this method will ascertain the profitability of an investment and it will provide results that are consistent along with those given via return ratios.

Posted Date: 1/30/2013 5:06:19 AM | Location : United States







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

Write discussion on Accounting rate of return method or arr
Your posts are moderated
Related Questions
Debtors or Accounts Receiver Turnover Formula is as follow: Debtors/accounts receiver turnover  = Annual credit sales/Average debtor The ratio signify the number of ti

What are the Features of Stock Exchange The key features of stock exchange are as below: (1) Organised Market: Stock Exchange is an organized market. Each stock exchang

On the 5 th of March 2009, the Bank of England (BoE) lowered its main interest rate to 0.5%, the lowest on record since the Bank has published rates in 1970, which still remains u

Investment Opportunity and Capital Structure Investment Opportunity Lack of suitable investment opportunities, that is so, by positive returns or N.P.V., may encourage a

What are the types of Money and Bank Regulations? Types of Money : a. Commodity money b. A commodity-backed money c. Fiat money Bank Regulations: a. Deposit i

1. The current interest rate is 6.83%. CanGo.com's stock has a beta of 2.0. Estimate the cost of equity. 2. CanGo.com has a bond with a semiannual coupon rate of 9% and 5 year m

Comparison between Debt Finance and Ordinary Share Capital Differences between Debt Finance and Ordinary Share Capital as Equity Finance as   Ordina

Overlaps and Conflicts Overlaps - whenever attaining ONE MEANS achieving the another Conflicts - whenever attaining ONE CANNOT permit the achievement of another.

discuss the three approaches to the short -term financing problem and provide relevant examples of each.

Valuation of Securities The previous methods were perfect for valuing the entire business however it is also essential to ascertain the value of part of a business namely shar