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

Single input unbalanced output differential amplifier, dc and ac analysis

dc and ac analysis

Water distribution, examples dead end water distribution system

examples dead end water distribution system

What is the difference between journal entry & ledger?, What is the differe...

What is the difference between JOURNAL ENTRY & LEDGER? Journal is a journal of unique entrance. It is a journal where all the dealings of organization have been registered rela

CRO, different types of switches used in CRO

different types of switches used in CRO

XOR: XNOR GATES, how to draw a circuit to determine the parity of a 4-bit b...

how to draw a circuit to determine the parity of a 4-bit binary number?

Math problems solutions matlab, Matlab is a 4th technology selection langua...

Matlab is a 4th technology selection language, which is designed by The MathWorks. It provides an exact processing atmosphere. Matlab works a variety of math features like design o

Standard cost, Standard cost of the product

Standard cost of the product

Measurement uncertainty, Real measurements never deliver the true value of ...

Real measurements never deliver the true value of the physical quantity or measurand. The measurement uncertainty consists of a random error and a systematic error. Most of the err

Spot welding, In spot welding, the parts to be joined are normally over lap...

In spot welding, the parts to be joined are normally over lapped. The work piece are clamped between two water cooled copper electrodes. On the passage of a high transient current,

Fins vs canards , Fins vs Canards Canard control - Good lift/latax co...

Fins vs Canards Canard control - Good lift/latax control for moderate angles of attack. - Shed vortices can interfere with tail to generate roll moment. - Tendency to stall

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