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The accounting rate of return, also called the average rate of return is defined as:

accounting rate of return formula



Example 1:

Find out Accounting Rate of Return overall and individual in order to decide which year is best?

accounting rate of return example

(Acceptance Criterion: The higher the accounting rate of return the better the project)

Example 2:

Which one of the following project is best using Non-Discounting Criteria?

accounting rate of return solved example



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References

Financial Management: Theory and Practice, Dr Eugene F Brigham & C Micheal Ehrhardt

Fundamentals of Financial Management: Concise Edition, Brigham Houston

The Economist Guide to Financial Management, John Tennet

Financial Management: Core Concepts, Raymond M Brooks

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