Investment Decision-Making: Accounting Rate of Return (ARR)
Interactive

Investment Decision-Making: Accounting Rate of Return (ARR)

Intuition Publishing Pty Ltd
Updated Sep 24, 2020

Accounting rate of return is net income divided by the book value of an investment. The result is a percentage, which can then be compared with either a hurdle rate. Here we explore the ARR formula and its many variations, and discuss the strengths and weakness of the ARR approach.

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