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

Limited travel distances - means of escape, Limited travel distances - mean...

Limited travel distances - means of escape: Are travel distances within the maximum allowable distances published in the guidance? Is there good visibility in the

Water haedness, hardness of bore well water is less than sea water

hardness of bore well water is less than sea water

#title.finance management, #question1.what is commercial paper

#question1.what is commercial paper

Finance (Derivative Securities), Let C(K) denote a European vanilla Call op...

Let C(K) denote a European vanilla Call option with strike price K. Assume that all options are identical except for strike price, and strike prices satisfy (K1) What are the no-

Navigation systems , Navigation Systems • Traditional guidance systems...

Navigation Systems • Traditional guidance systems used mechanical gyroscopes (rate gyros) to measure the angular velocities of the vehicle or of the gimbals on which the seeke

Permeability of moulding sand, Permeability of Moulding Sand is the proper...

Permeability of Moulding Sand is the property of the sand, which permits the gases and steam to escape through the sand mould. For this purpose, the sand must be porous. Permeabil

Flight control - root location, In a continuous time linear system whenever...

In a continuous time linear system whenever any of the characteristic roots, say λ, has a positive realpart, ie R e (λ) = λ R > 0, then the system is unstable. Stability is ensure

Financial Ratio, The following information was extracted from the accountin...

The following information was extracted from the accounting records of De Walt Company as at 28 February 2011 (the end of their financial year): Sales (50% on credit) 1 400 000 Cos

Aviation legislation - registration of aircraft, Aviation legislation - REG...

Aviation legislation - REGISTRATION of AIRCRAFT: All aircraft must be registered in the U.K., before they are permitted to fly. They must also have their allotted registration

Budget and determining, In Corporate finance, Experts engaged in this occup...

In Corporate finance, Experts engaged in this occupation have the liability to increase the organization's revenue, shareholder's money, investment spending budget and determining

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