Accounting rate of return (arr), Financial Management

Assignment Help:

Accounting Rate of Return (ARR):

This technique relies on the rate of return every project will earn over its life. It takes the help of accounting profit while calculating the returns.  There are 2 methods of calculating ARR.

(i)                 On the basis of original investment,

1701_accounting rate of return.png

This technique of calculation was rejected on the ground that the original outlay is gradually recovered over the project life because of depreciation charge.

904_accounting rate of return1.png

When depreciation is to be taken on a straight-line basis and no salvage value is understood, the average investment is always equal to one-half of the original in- vestment, and the resulting rate of return is always two times the rate determined on the basis of original investment.


Related Discussions:- Accounting rate of return (arr)

Determine profit for the year, The assets and liabilities of S Harrison as ...

The assets and liabilities of S Harrison as at 30 June 2012 are: On 1 July 2011 when the business commenced, Harrison owed $58,000 on the land and buildings and $1,200 on

Financial maket, knowledge of financial market is power discuss

knowledge of financial market is power discuss

Distinguish between lease and hire purchase, Distinguish between Lease and ...

Distinguish between Lease and Hire Purchase. What are the circumstances in which each of the system of financing is better than other?

Personal Finance, The difference between the cost of attending a particular...

The difference between the cost of attending a particular school and the expected family contribution, minus any other financial aid.

What is commercial papers, Q. What is Commercial Papers? Commercial Pap...

Q. What is Commercial Papers? Commercial Papers: Commercial papers (CPs) are short-term, unsecured securities issued by highly creditworthy large companies. They are issued wit

Accounts receivable are sometimes not collected, Accounts receivable are so...

Accounts receivable are sometimes not collected.Why do companies extend trade credit when they could insist on cash for all sales? Extending trade credit almost for all the tim

How to calculate rate of return?, Illustration Consider a Rs.1,00...

Illustration Consider a Rs.1,000 par value bond whose current market price is Rs.850. The bond carries a coupon rate of 8% and has a maturity period of 9 years. Wha

Treasury bills, T-Bills are issued to enable the government to tide o...

T-Bills are issued to enable the government to tide over short-term liquidity requirements with maturities varying from a fortnight to a year. These instruments a

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