“Accounting rate of return”的意思、由来-开放百科全书

词条

Accounting rate of return

释义

Basic formulas
Pitfalls
See also
References

{{About|a capital budgeting concept|other uses|ARR (disambiguation){{!}}ARR}}{{accounting}}Accounting rate of return, also known as the Average rate of return, or ARR is a financial ratio used in capital budgeting.^[1] The ratio does not take into account the concept of time value of money. ARR calculates the return, generated from net income of the proposed capital investment. The ARR is a percentage return. Say, if ARR = 7%, then it means that the project is expected to earn seven cents out of each dollar invested (yearly). If the ARR is equal to or greater than the required rate of return, the project is acceptable. If it is less than the desired rate, it should be rejected. When comparing investments, the higher the ARR, the more attractive the investment. More than half of large firms calculate ARR when appraising projects.^[2]

The key advantage of ARR is that it is easy to compute and understand. The main disadvantage of ARR is that it disregards the time factor in terms of time value of money or risks for long term investments. The ARR is built on evaluation of profits and it can be easily manipulated with changes in depreciation methods. The ARR can give misleading information when evaluating investments of different size.^[3]

Basic formulas

where:

Pitfalls

This technique is based on profits rather than cash flow. It ignores cash flow from investment. Therefore, it can be affected by non-cash items such as bad debts and depreciation when calculating profits. The change of methods for depreciation can be manipulated and lead to higher profits.
This technique does not adjust for the risk to long term forecasts.
ARR doesn't take into account the time value of money.

References

1. ^Accounting Rate of Return - ARR
2. ^Arnold, G. (2007). Essentials of corporate financial management. London: Pearson Education, Ltd.
3. ^{{Cite web|url=http://tiduko.com/how-to-calculate-accounting-rate-of-return.html|title=How to Calculate Accounting Rate of Return {{!}} Tiduko.com {{!}} Never Stop Learning|website=tiduko.com|language=en|access-date=2017-04-25}}

2 : Financial ratios|Capital budgeting

随便看

开放百科全书收录14589846条英语、德语、日语等多语种百科知识，基本涵盖了大多数领域的百科知识，是一部内容自由、开放的电子版国际百科全书。

Basic formulas

Pitfalls

See also

References