Accounting Rate of Return - ARR

ARR provides a quick estimate of a project's worth over its useful life. ARR is derived by finding profits before taxes and interest.

ARR is an accounting method used for purposes of comparison. The major drawbacks of ARR are that it uses profit rather than cashflows, and it does not account for the time value of money.


Investment dictionary. . 2012.

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  • accounting rate of return — Fin the ratio of profit before interest and taxation to the percentage of capital employed at the end of a period. Variations include using profit after interest and taxation, equity capital employed, and average capital for the period …   The ultimate business dictionary

  • Учетный (расчетный) коэффициент окупаемости (ACCOUNTING RATE OF RETURN)  — Отношение суммы прибыли за период к усредненной стоимости инвестиций, произведенных в течение этого периода Важно, что учетный коэффициент окупаемости оценивается по фактическому доходу, а не по дисконтированным потокам денежных средств …   Словарь терминов по управленческому учету

  • rate of return — The annual income earned from the investment of resources in a commercial or economic activity, usually expressed as a percentage of the original investment. In a discounted cash flow appraisal, for example, the rate of return may be expressed as …   Accounting dictionary

  • rate of return pricing — Setting the prices of a range of products so that they earn a predetermined required rate of return or return on capital employed …   Accounting dictionary

  • Rate of return — In finance, rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.… …   Wikipedia

  • rate of return — Calculated as the (value now minus value at time of purchase) divided by value at time of purchase. For equities ( equity), we often include dividends with the value now. See also: return, annual rate of return. Bloomberg Financial Dictionary * * …   Financial and business terms

  • rate of return — Fin an accounting ratio of the income from an investment to the amount of the investment, used to measure financial performance. EXAMPLE There is a basic formula that will serve most needs, at least initially: [(Current value of amount invested – …   The ultimate business dictionary

  • required rate of return — The rate of return, usually expressed as a percentage, that an organization determines is necessary before an investment can be regarded as profitable and therefore justified. In a discounted cash flow appraisal the required rate of return may be …   Accounting dictionary

  • internal rate of return — IRR An interest rate that gives a net present value of zero when applied to a projected cash flow of an asset, liability, or financial decision. This interest rate, where the present values of the cash inflows and outflows are equal, is the… …   Accounting dictionary

  • Internal rate of return — The internal rate of return (IRR) is a capital budgeting metric used by firms to decide whether they should make investments. It is an indicator of the efficiency or quality of an investment, as opposed to net present value (NPV), which indicates …   Wikipedia

  • internal rate of return — ( IRR) A measure of yield that relates the cash flow from each interest payment and the cash flow from the investment s redemption value at maturity to the purchase price of the investment. It is a present value calculation that reflects the time …   Financial and business terms

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