Accounting Rate of Return
What is accounting rate of return (ARR)?
The accounting rate of return (ARR) is the return an individual can expect to receive based on an investment made. ARR is also known as the simple rate of return and is useful for the speedy calculation of a company’s financial success or failures.
Where have you heard about accounting rate of return (ARR)?
ARR is an extremely useful system, and when employed with other frameworks it can lead to a very accurate financial analysis. It’s likely that many experienced traders and businesses will have used ARR at some point.
What you need to know about accounting rate of return (ARR).
ARR is calculated by dividing the annual accounting profit by the original investment of the project. It is a necessity for any investor wanting to examine the value of their investment quickly and simply. However, ARR is not beneficial when used comparatively as it does not take into consideration many factors that may impact an investment over time. It also does not take into account cash flow or Time Value of Money.
Find out more about accounting rate of return (ARR).
When calculating the accounting rate of return it is helpful to understand profit and loss.