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

Cathode ray tube (crt), Cathode ray tube (crt): Displays of this type, ...

Cathode ray tube (crt): Displays of this type, which are based on the electron beam scanning technique, have been used in aircraft for many years. They were first used to disp

Construction, What are the problems arises during construction and their so...

What are the problems arises during construction and their solutions

Blow hole and pin hole porosity, Blow Holes (i) Exc...

Blow Holes (i) Excessive moisture in the moulding sand. (ii) Low permeability and excessive fine grain sands. (iii

HELP!!, HELP IN ELECTRONIC...I AM DOING ELECTRONIC ENG. ... GUIDE ME THE WA...

HELP IN ELECTRONIC...I AM DOING ELECTRONIC ENG. ... GUIDE ME THE WAY...

Illustrate flat plate collectors. Describe liquid fl, Illustrate flat plate...

Illustrate flat plate collectors. Describe liquid flat plate collector with relevant diagram.

Tig and mig welding techniques, Q. Explain the TIG and MIG systems of arc w...

Q. Explain the TIG and MIG systems of arc welding Give the applications of each. OR Explain briefly

Fluid mechanics, 2 horizontal flate plate 0.15mm apart and space between th...

2 horizontal flate plate 0.15mm apart and space between them is filled with an oil having viscosity 1poise the upper plate of area 1.5m2 is required to move with a speed of 0.5m/se

When should stock rather than debt to fund its operations?, When should sto...

When should stock rather than debt to fund its operations? There are several reasons for an organization to problem inventory rather than financial obligations. The first is if

Dynamics of structures, dynamics

dynamics

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

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