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The accounting rate of return (ARR) is a simple formula that allows investors and managers to determine the profitability of an asset or project.
Accounting Rate of Return Formula; ARR = (Net Income / Average Investment) * 100%. Accounting Rate of Return is calculated by taking the beginning book value and ending book value and dividing it by the beginning book value.
Guide to the Accounting Rate of Return & its definition. Here we learn how to calculate ARR using its formula along with examples & excel template.
Accounting Rate of Return (ARR) is the average net income an asset is expected to generate divided by its average capital cost, expressed as an annual percentage. The ARR is a formula used to make capital budgeting decisions.
The formula for calculating the Accounting Rate of Return is: ARR = Average Annual Profit from the investment / Initial Investment * Instead of initial investment, we can also take average investments, but the final answer may vary depending on that.
The Accounting Rate of Return formula is straight-forward, making it easily accessible for all finance professionals. It is computed simply by dividing the average annual profit gained from an investment by the initial cost of the investment and expressing the result in percentage.
The accounting rate of return formula (or ARR) is used in corporate finance to calculate the potential profitability of an investment or acquisition for a business. Learn more about accounting rate of return and how to calculate it.
The accounting rate of return (ARR) is a helpful formula when figuring out the annual percentage rate of return of a project. ARR is calculated by dividing the initial investment by the average annual profit.
Accounting rate of return is the estimated accounting profit that the company makes from investment or the assets. It is the percentage of average annual profit over the initial investment cost. This method is very useful for project evaluation and decision making while the fund is limited.
Accounting rate of return (also known as simple rate of return) is the ratio of estimated accounting profit of a project to the average investment made in the project. ARR is used in investment appraisal.