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

Flight control - characteristic equation, characteristic equation The c...

characteristic equation The characteristic equation (C.E.) corresponding to the linear state space equations comprising the state equation? x = Ax + Bu and output equatio

Corrosion cracking, offer an explanation for why cracking might have occurr...

offer an explanation for why cracking might have occurred. Give at least three suggestion on how to prevent this type of corrosion. You may supple with appropriate figures

PLC, True or False, In a PLC system, there is a physical connection between...

True or False, In a PLC system, there is a physical connection between field input devices and output devices.

Range - Aircraft performance, Safe Operating Range The SOR is the max ...

Safe Operating Range The SOR is the max distance between airfields which the aircraft can fly with full allowance for headwind, diversion, stacking. • Distance flown in climb

What is the company’s net working capital, Working capital: Laurel Electron...

Working capital: Laurel Electronics reported the following information at its annual meetings. The company had cash and marketable securities worth $1,235,455, accounts payables wo

Vibration analysis of aircraft, Vibration Analysis Gas turbine engines ...

Vibration Analysis Gas turbine engines have extremely low levels of vibration compared to piston engines. Changes in vibration levels could occur therefore without being notic

Electronics, square wave generator using op amp

square wave generator using op amp

Thrust indication - aircraft engine, Thrust indication: Although rpm ga...

Thrust indication: Although rpm gauges give an indication of the rotational speed of the compressor, they do have one drawback. They do not normally indicate the thrust output

Unidirectional fabric, Unidirectional Fabric A unidirectional (UD) ply ...

Unidirectional Fabric A unidirectional (UD) ply is one in which all of the fibres run in one direction only. A small amount of fibre or other material may run in other directio

What is ebidta?, What Is EBIDTA? EBITDA appears for income before atten...

What Is EBIDTA? EBITDA appears for income before attention, taxation, devaluation, and amount. EBITDA came into large use among personal investment companies, seeking to determ

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