Accounting Rate of Return Calculator

✖Average Annual Profit refers to the average amount of profit earned by a business or project over a period of one year.ⓘ Average Annual Profit [AP]			+10% -10%
✖The Initial Investment is the amount required to start a business or a project.ⓘ Initial Investment [Initial Invt]			+10% -10%

✖Accounting Rate of Return is a financial metric used to evaluate the profitability of an investment or project.ⓘ Accounting Rate of Return [ARR]

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Formula

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Accounting Rate of Return

Formula

ARR = (\frac{AP}{Initial Invt}) \cdot 100

Example

35 = (\frac{700}{2000}) \cdot 100

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Accounting Rate of Return Solution

STEP 0: Pre-Calculation Summary

Formula Used

Accounting Rate of Return = (Average Annual Profit/Initial Investment)*100
ARR = (AP/Initial Invt)*100
This formula uses 3 Variables

Variables Used

Accounting Rate of Return - Accounting Rate of Return is a financial metric used to evaluate the profitability of an investment or project.
Average Annual Profit - Average Annual Profit refers to the average amount of profit earned by a business or project over a period of one year.
Initial Investment - The Initial Investment is the amount required to start a business or a project.

STEP 1: Convert Input(s) to Base Unit

Average Annual Profit: 700 --> No Conversion Required
Initial Investment: 2000 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

ARR = (AP/Initial Invt)*100 --> (700/2000)*100

Evaluating ... ...

ARR = 35

STEP 3: Convert Result to Output's Unit

35 --> No Conversion Required

FINAL ANSWER

35 <-- Accounting Rate of Return

(Calculation completed in 00.004 seconds)

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Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has created this Calculator and 200+ more calculators!

Verified by Kashish Arora

Satyawati College (DU), New Delhi

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Go After Tax Cost of Debt = (Risk Free Rate+Credit Spread)*(1-Tax Rate)

Accounting Rate of Return

Go Accounting Rate of Return = (Average Annual Profit/Initial Investment)*100

Payback Period

Go Payback Period = Initial Investment/Cashflow per Period

Cost of Debt

Go Cost of Debt = Interest Expense*(1-Tax Rate)

Accounting Rate of Return Formula

Accounting Rate of Return = (Average Annual Profit/Initial Investment)*100
ARR = (AP/Initial Invt)*100

What is Accounting Rate of Return?

The ARR (Accounting Rate of Return), also known as the Average Rate of Return or the Return on Investment (ROI), is a financial metric used to evaluate the profitability of an investment or project.
The ARR is expressed as a percentage and represents the return earned on the investment on an annualized basis. It provides a simple measure for comparing the profitability of different investment opportunities or projects. However, it has some limitations, such as not considering the time value of money or the timing of cash flows, which may make it less suitable for evaluating projects with uneven cash flows over time.

How to Calculate Accounting Rate of Return?

Accounting Rate of Return calculator uses Accounting Rate of Return = (Average Annual Profit/Initial Investment)*100 to calculate the Accounting Rate of Return, The Accounting Rate of Return formula is defined as a financial metric used to evaluate the profitability of an investment or project. It calculates the average annual profit or return generated by an investment relative to its initial cost. Accounting Rate of Return is denoted by ARR symbol.

How to calculate Accounting Rate of Return using this online calculator? To use this online calculator for Accounting Rate of Return, enter Average Annual Profit (AP) & Initial Investment (Initial Invt) and hit the calculate button. Here is how the Accounting Rate of Return calculation can be explained with given input values -> 35 = (700/2000)*100.

FAQ

What is Accounting Rate of Return?

The Accounting Rate of Return formula is defined as a financial metric used to evaluate the profitability of an investment or project. It calculates the average annual profit or return generated by an investment relative to its initial cost and is represented as ARR = (AP/Initial Invt)*100 or Accounting Rate of Return = (Average Annual Profit/Initial Investment)*100. Average Annual Profit refers to the average amount of profit earned by a business or project over a period of one year & The Initial Investment is the amount required to start a business or a project.

How to calculate Accounting Rate of Return?

The Accounting Rate of Return formula is defined as a financial metric used to evaluate the profitability of an investment or project. It calculates the average annual profit or return generated by an investment relative to its initial cost is calculated using Accounting Rate of Return = (Average Annual Profit/Initial Investment)*100. To calculate Accounting Rate of Return, you need Average Annual Profit (AP) & Initial Investment (Initial Invt). With our tool, you need to enter the respective value for Average Annual Profit & Initial Investment and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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