Accounting rate of return method, finance, Other Engineering

Accounting rate of return method, finance, Other Engineering

Assignment Help:

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).

Related Discussions:- Accounting rate of return method, finance

Banking and finance, identify the role of the regulators and problems assoc...

identify the role of the regulators and problems associated with regulation

Case1, Flifla sells tomatoes every day in Suk al Marqazi, the downtown frui...

Flifla sells tomatoes every day in Suk al Marqazi, the downtown fruit and vegetable market. He finds that he can order tomatoes in crates of 25 kg and he is able to stock a maximum

Evacuation of a high rise building - means of escape, Evacuation of a high ...

Evacuation of a high rise building - means of escape: Evacuation of a high rise building is likely to be split into two or more phases. Initially, when the alarm activates (f

Wet process of manufacturing of portland cement, What are Portland cement a...

What are Portland cement and its composition? Describe the manufacturing process of cement with diagram. Manufacturing of Portland cement: Dry and Wet Process, Describe the

Int. finance management, Discuss the roles of international financial syste...

Discuss the roles of international financial system in international business

Telecommunication, Busy hour traffic

Busy hour traffic

Crystal structure, how can we determine the crystal structure of material b...

how can we determine the crystal structure of material by having interplanar spacing d?

Matlab, how to use mean and standard deviation with matlab?

how to use mean and standard deviation with matlab?

Cash flow statement, Cash flow statement is one of the three necessary repo...

Cash flow statement is one of the three necessary reporting & measurement systems for a company. The cash flow statement gives a third perspective alongside the profit & loss accou

Air flow control system – operation, Air flow control system – operation: ...

Air flow control system – operation: The stages of the compressor are matched to give the highest efficiency in the speed range maximum rev/min. To extend the range of smooth

Write Your Message!

Name

Email id

Message

Verfication Code

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!

Submit Assignment

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