What does accounting rate of return mean?
Definitions for accounting rate of return
ac·count·ing rate of re·turn
This dictionary definitions page includes all the possible meanings, example usage and translations of the word accounting rate of return.
Wikipedia
Accounting rate of return
Accounting rate of return, also known as the Average rate of return, or ARR is a financial ratio used in capital budgeting. The ratio does not take into account the concept of time value of money. ARR calculates the return, generated from net income of the proposed capital investment. The ARR is a percentage return. Say, if ARR = 7%, then it means that the project is expected to earn seven cents out of each dollar invested (yearly). If the ARR is equal to or greater than the required rate of return, the project is acceptable. If it is less than the desired rate, it should be rejected. When comparing investments, the higher the ARR, the more attractive the investment. More than half of large firms calculate ARR when appraising projects.The key advantage of ARR is that it is easy to compute and understand. The main disadvantage of ARR is that it disregards the time factor in terms of time value of money or risks for long term investments. The ARR is built on evaluation of profits and it can be easily manipulated with changes in depreciation methods. The ARR can give misleading information when evaluating investments of different size.
Numerology
Chaldean Numerology
The numerical value of accounting rate of return in Chaldean Numerology is: 8
Pythagorean Numerology
The numerical value of accounting rate of return in Pythagorean Numerology is: 7
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"accounting rate of return." Definitions.net. STANDS4 LLC, 2024. Web. 30 Apr. 2024. <https://www.definitions.net/definition/accounting+rate+of+return>.
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