Book rate of return

book 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. Accounting Rate of Return, shortly referred to as ARR, is the percentage of average accounting profit earned from an investment in comparison with the average. The accounting rate of return is used in capital budgeting to estimate whether to proceed with an investment. The calculation is the accounting. This is very informative discussion Reply. Capital budgeting techniques explanations. How should average book value be calculated? ARR is considered to be theoretically inferior than other investment appraisal methods such NPV and IRR for the following reasons:. Accounting rate of return method does not take into account the time value of money.

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There is no consideration of the increased risk in the variability of forecasts that arises over a long period of time. Net Book Value of Year 0 will be equal to the initial investment. Every things I am clear but average investment. Navigation menu Personal tools Not logged in Talk Contributions Create account Log in. The ARR is a percentage return.

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The Good Year manufacturing company has the following different alternative investment proposals: Leave a Comment Cancel reply. Consider the following example:. About Contact Disclaimer Privacy Site map Copyright. Net Book Value at the mid-year. Interaction Help About Wikipedia Community portal Recent changes Contact page. Every things I am clear but average investment. book rate of return


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