Simple rate of return

(redirected from Accounting Rates of Return)

Simple rate of return

The return from investments figured by dividing income plus capital gains by the amount of capital invested. The effect of compounding is not taken into account.

Simple Rate of Return

An estimate of the return on an investment. It is calculated simply by finding the investment's profit before taxes and interest expenses. The simple rate of return is easy to calculate but is not always accurate because it considers the investment's profit rather than cash flow. It also does not take into account the effects of compounding. It is also called the accounting rate of return or the book value method.
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McGowan (1983), 'On the Misuse of Accounting Rates of Return to Infer Monopoly Profits', American Economic Review 73 (March), 82-97.
Stark (1988), 'Cash Recovery Rates, Accounting Rates of Return and the Estimation of Economic Performance', Journal of Accounting and Public Policy 7 (Winter), 293-311.
1986), 'The Befuddled Merchant of Venice: More on the "Misuse" of Accounting Rates of Return vis-a-vis Economic Rates of Return', in M.
1988), 'On the Validity of Accounting Rates of Return in Cross-Sectional Analysis: Theory, Evidence, and Implications', Journal of Accounting and Public Policy 7 (Winter), 267-292.
In the discussion that follows, we'll analyze the three major discounters in terms of accounting rates of return, profitability, asset productivity (turnover), segment footnotes, and accounting quality.
Accordingly, it is difficult to focus on a single such arrangement and to identify the correspondence between the contractual choice and firm performance (as measured by accounting rates of return, or Tobin's Q, for example).
It is doubtful whether the Fisher and McGowan analysis of economic and accounting rates of return can be extended to industry aggregates considered onver thirty years.
Compensation also seemed to be more responsive to variations in accounting rates of return than to stock market rates of return.

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