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

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

Polymers, what are the merits and demerits of free radical

what are the merits and demerits of free radical

Capital budgeting, explain the objective of capital budgeting

explain the objective of capital budgeting

CHEMICAL, TRANSPORT 2 CHEMICAL PROCESS CONTROL CHEMICAL REACTIONS ENGINEERI...

TRANSPORT 2 CHEMICAL PROCESS CONTROL CHEMICAL REACTIONS ENGINEERING

Manufacturing definition and its importance, Economic Definition :  Manufa...

Economic Definition :  Manufacturing increase the value of product. Technological Definition :  Manufacturing is a process which gives required strength, shape and size of t

#tmjjlitle.., Industries that manufacture racing cars prefers nickel based ...

Industries that manufacture racing cars prefers nickel based alloys for engine components and iron based alloys for structural parts. Justify this statement.

What are the elements limiting higher data rate in networks, Question: ...

Question: (a) What are the elements limiting high data rate in cellular networks? (b) Describe the following characteristics of 4G mobile networks: - Always on - RAN A

What processes shape earth’s surface, Expertsmind.com brings you unique so...

Expertsmind.com brings you unique solution in physicsWhat processes shape Earth's surface? What processes shape Earth’s surface? -Impact craters: bowl-shaped cr

Write Your Message!

Captcha
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!

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