Accounting Rate of Return (ARR) | Explained with Example

In this lesson, we go through an example of the Accounting Rate of Return (ARR). We explain what it is, why it is calculated, and the formula for the Accounting Rate of Return (ARR) as well as a thorough example. We also go through the advantages and disadvantages of the Accounting Rate of Return (ARR).

Timestamps:
Accounting Rate of Return Definition: 00:00
Interpret / Analyze the Accounting Rate of Return: 00:50
Accounting Rate of Return Formula: 01:52
Accounting Rate of Return Example: 03:08

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[kafulamilambo]

wow thank you so much I was failing to understand why other examples have to calculate depreciation or subtract it from the figures given, but you have explained quite well the use of net profits and the subtraction which only comes when you are given cash flows instead. This is well appreciated, you are a great lecturer

[thembekatg]

No you are good prof, been watching the your video they are helping indeed.

[CrownAdekunle]

Simple and straight forward

Thank you

[divineethy]

This video was very helpful and straight forward, , , thank you

[mikaellepierre-paul]

This is really helpful, thank you so much

[prisciousmnukwa]

Wow! Ur videos are so helpful they make it easier to understand the calculations, if u're asked to calculate NPV without without discount factors how to I calculate it?

[ornellamasengo]

Let me tell you that you are the best, I wish you were my lecturer

[nevakasichana]

Thnx., , explanation is easy to understand

[violetmuthoni]

Do you calculate the 28% tax rate as a depreciation when given cash flows instead of net profit?

[cuongnguyentan]

What is the meaning of average investment fomulla. Why salvage value is considering as an investment in average investment fomular

[yourgirlstyebrooke]

Hello again, so I wanted to know, in some questions you see the total profits been deducted from the investment to get profits... how do you know when to use this method... please I need answers

[ejikea.francis]

What is you are given Net working capital?

[ayandaphohlo]

Do we always add salvage value all the time?

[Jaxen_Dalentos]

What about mutually exclusive projects.?

[Rose-xomx]

How to calculte arr when depreciation given in reducing blnce method?

[lesegomoroke]

What is the asset’s required rate of return if beta = 0, 9; risk free rate of return = 8% and return on the market portfolio of assets = 14%

[shannelmokgabudi]

I wasn’t given a tax rate but I was given revenues and expenses instead of profits. How do I go about it?

[ihalagen]

Can you Explain why Salvage Value was added to the investment instead deduct ?
Salvage Value is not Investment and It is a recovery of Investment which deserved to be deducted ??

[rahmaruun]

Kindly do all capital budgeting method.
PBP, NPV, IRR

[idiongjustina]

Pls why didn't you calculate the tax given in the question?