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

Composite materials - notation of axes, Notation for Body Axes The stan...

Notation for Body Axes The standard notation for the body axis sytem for aircraft dynamics. This sectionexplains the signi?cance of the term body axis and develops the non-line

Origin-destination matrix, (a) Explain briefly any five roadway elements. ...

(a) Explain briefly any five roadway elements. Include function and current practices used in the design of these elements. (b) Discuss any three emerging (i.e. 'Intelligent T

Thermodynamics, original temp. of plate is 25 degree c.when put in burnace ...

original temp. of plate is 25 degree c.when put in burnace its upper part is 250 c and lower is 100 and mass is 56kg.find out heat transfer

Lean enterprise, a department manufactures a produt using a kanban system. ...

a department manufactures a produt using a kanban system. data is demand/hr= 30, container size= 5, unit processing time= 1.25 min. find the minimum number of kanban assuming reple

Unit step, u[-n-1]

u[-n-1]

Capital Rationing, Capital Rationing Capital Rationing refers to a situati...

Capital Rationing Capital Rationing refers to a situation where the firm is constrained for external, or self-imposed, reasons to obtain necessary funds to invest in all investmen

Step growth polymerization, Consider 1:1 stoichiometric polymerisation of 1...

Consider 1:1 stoichiometric polymerisation of 1,4-diaminobutane with sebacoyl chloride. (a) Write down a balanced chemical equation for the polymerization (b) Name the polymer fo

Process Control, Specify the inner-loop gain such that the damping coeffici...

Specify the inner-loop gain such that the damping coefficient of the closed loop is equal to 0.4

Gas Furnace, Furnace limit switches are wired in series with the?

Furnace limit switches are wired in series with the?

Computation of Net Cash Flows for the new product, Computation of Net Cash ...

Computation of Net Cash Flows for the new product:

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