Acceptance rule of accounting rate of return or arr, Finance Basics

Assignment Help:

Acceptance Rule of Accounting Rate of Return or ARR

ARR procedure will accept those projects whose ARR is higher rather than that set with management or with bank rate and it will provide highest ranking to ventures along with highest ARR and vice versa.

Advantages

1. Simple to use and understand.

2. Readily calculated from accounting data therefore much easier to ascertain.

3. It is consistent along with profitability objectives as it analyses the return from complete inflows and like that it will provide a hint or a clue to the profitability of venture.

Disadvantages

1. It pays no attention to time value of money.

2. It does not seem how soon the investment should recover the cost like it is owner looking quite than creditor oriented approach.

3. It employs accounting profits instead of cash inflows some of that may not be realizable.


Related Discussions:- Acceptance rule of accounting rate of return or arr

Weighted average cost of capital, Below is information provided for tw...

Below is information provided for two companies, A and B.  Assuming a risk-free rate of 2.5%, an effective tax rate of 40%, and a market risk premium of 5.5%, estimate th

Debt finance in us of small companies, Debt Finance in US of Small Companie...

Debt Finance in US of Small Companies Why It CAN Be Difficult For Small Companies to Raise Debt Finance in US Lack of safety avoidances of finances available

Component ratings under the camel rating system, Question: (a) Describe...

Question: (a) Describe the process for assigning composite and component ratings under the CAMEL rating system. (b) The IMF has developed some indicators to identify early

Reasons for different interest rate, Reasons for Different Interest Rate ...

Reasons for Different Interest Rate Interest rates may differ in different market and market segment since: i) Size of the loan: Deposits above specific amounts into the

Calculate holding period return, 1)       What is the holding period re...

1)       What is the holding period return to an investor who bought 100 shares of Charter Oil nine months ago for $36 a share, received two $50 dividend checks, and sold the s

Assignment, How would you explain the value of financial planning to friend...

How would you explain the value of financial planning to friends or family? Which topics will you discuss with children in your life? Which topics do you feel are most imp

Determine total expenditure, Determine the amount you would be willing to p...

Determine the amount you would be willing to pay for a $1,000 par value bond paying $80 interest each year (annual) and maturing in 12 years, assuming you wanted to earn a 9% rate

Who is floor broker, Who is Floor Broker Floor brokers aren't many in n...

Who is Floor Broker Floor brokers aren't many in number. They execute orders for fellow  members  and  receive  a  share  brokerage  commission  charged  by  a commission broke

Scope of supply chain management, The scope of supply chain management  ...

The scope of supply chain management  Supply chain management includes the determination of suppliers; distributors, distribution channels and warehousing; manufacturing infor

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