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

Assignment Help:

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.


Related Discussions:- Acceptance rule of accounting rate of return or arr

Important points for working capital cycle, Important points for Working Ca...

Important points for Working Capital Cycle A lengthy working capital cycle is a sign of poor management of debtors and stock reflecting low turnover of debtors and stock and l

Example of debt finance, Example of Debt Finance An example: Intere...

Example of Debt Finance An example: Interest = 10% tax rate = 30% The effective cost of debt (interest) = Interest rate (1 - T) = 10%(1-0.30) = 7% Consider comp

Types of partners, Types of Partners 1. General Partners -Unlimited ac...

Types of Partners 1. General Partners -Unlimited active and liability in participation in partnership activities. 2. Limited partners - Limited liability in the management of

Calculate its operating-financial and combine leverage, The operating and c...

The operating and cost data of ABC Ltd. are: Sales Rs. 20,00,000 Vari

Capital Allocation, Consider the following capital market yielding 1% per y...

Consider the following capital market yielding 1% per year and a mutual fund consisting of 60% stocks and 40% bonds. expected return of stocks 9.75% per year and expected return on

Development of lease finance in middle asia, Development of Lease Finance i...

Development of Lease Finance in Middle Asia Reasons Why Lease Finance Is Not Well Developed In Middle Asia 1. Lease charges are generally prohibitive that is the cost

Assignment, what are the difference between receipt and payment account and...

what are the difference between receipt and payment account and income and expenditure account ?

Foreign credit insurance association (fcia), Foreign Credit Insurance Assoc...

Foreign Credit Insurance Association (FCIA) An agent of the Export/Import Bank, FCIA gives exporters with insurance coverage beside both commercial and political risk. The main

Foreign trade balance, Foreign Trade Balance If the Government buys or...

Foreign Trade Balance If the Government buys or imports much more than it sells or exports there will be a trade deficit such will require financing.The most important source

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