Accounting rate of return method or arr, Finance Basics

Assignment Help:

Accounting Rate of Return Method or ARR

This method utilizes accounting profits from financial status to assess the viability of investment proposal via diving the average income after tax via average investment.  The investment would be equivalent to the original investment in addition the salvage value divided with two or the initial investment divided with two or dividing the total of the investment book value after depreciating with the life of the project.  This method is known as also book value method or financial statement method.  The rate of return on asset method or adjusted rate of return method is given via:

ARR = ( Average income/ Average investment)    x 100 

or (Average income - Average depreciation)/Initial investment

Not like PBP, this method will ascertain the profitability of an investment and it will provide results that are consistent along with those given via return ratios.


Related Discussions:- Accounting rate of return method or arr

Profitability index or p.i., Profitability Index or P.I. P.I. (benefit...

Profitability Index or P.I. P.I. (benefit-cost ratio) = Present value of inflows / Present value of cash outlay Whether P.I. is greater than 1.0, invest and whereas less th

Solutions to agency problem, Solutions to agency problem The bondholde...

Solutions to agency problem The bondholders might receive the following procedures to protect themselves from the process of the shareholders that might dilute the value of th

Tarniwala and dealer in non-cleared securities, Tarniwala and Dealer in N...

Tarniwala and Dealer in Non-cleared Securities Tarniwala: He/she is a specialist or jobber in selected shares. He/she makes market i.e. provide continuity to dealings. They

Net Income Problem:, A firm has the following accounts: What is the net inc...

A firm has the following accounts: What is the net income for the period? Net patient revenue = $1,500,000 Supply expense = $200,000 Depreciation expense = $100,000 Salaries and b

1, what will happen to the loss on account of premium redemption of debentu...

what will happen to the loss on account of premium redemption of debenture through sinking fund? Where do i close this account to?

Determine the component of return, Determine the Component of Return ...

Determine the Component of Return Rate of return from an investment consists of the two: (i) Yield: Interest or dividend received is called yield. (ii) Capital Appreci

What are the types of orders, What are the Types of orders (i) Spot ...

What are the Types of orders (i) Spot Delivery: Spot delivery means delivery and payment on the same day as date of the contract or on the next day. (ii) Hand Delivery:

Creative technology ltd, Download a set of financial statements "Creative T...

Download a set of financial statements "Creative Technology Ltd" From that set of Financial Statements. IN YOUR OWN WORDS, understand what the main revenue  streams of the business

Average rate of return - down payment, 1.  Determine what is the future val...

1.  Determine what is the future value of $20 a week for 10 (ten) years at 6 percent interest? Assume the first payment takes place at the end of this week. 2.  Kristina started

Determine the required rate of return on the security, Elephant Company com...

Elephant Company common stock has a beta of 1.2. The risk-free rate is 6% and the expected market rate of return is 12%. Determine the required rate of return on the security.

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