# Simple rate of return

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## 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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As in Table 3, the other tools were not properly used, while the least used technique was the accounting rate of return (mean = 0.80).
However, the latter also include in the definition of conservative accounting the practice of recording positive net-present-value investments at unbiased historical cost to yield an accounting rate of return equal to the internal rate of return.
Meanwhile, accounting rate of return, ROI, and residual income prematurely kill investment ideas in a more subtle fashion.
Similarly, the accounting rate of return figured less prominently as a capital investment decision making tool.
For example 86 per cent of those organizations which "often" or "always" used the payback method combined it with a discounting method and 94 per [TABULAR DATA FOR TABLE I OMITTED] [TABULAR DATA FOR TABLE II OMITTED] [TABULAR DATA FOR TABLE III OMITTED] cent of those firms "often"/"always" using the accounting rate of return also combined it with a discounting method.
Payback and Accounting Rate of Return 12.7% (n=9) Discounted Cash Flow and Payback 9.9% (n=7) Discounted Cash Flow and Accounting Rate of Return 1.4% (n=1) Payback, Accounting Rate of Return and Discounted Cash Flow 11.3% (n=8) One Technique 43.7% (n=31) No Techniques 21.1% (n=15) Given that the small firms in this study appeared, on average, to be pursuing similar objectives to those found in previous large company empirical studies, it could be argued (in contrast to Keasey and Watson, 1993), that it is the lack of financial management skills in the small firm sector which (at least partly) explains the relatively low usage of the more sophisticated capital budgeting techniques, rather than a pursuance of non-wealth maximisation firm objectives(2).
Several different definitions of accounting rate of return are examined.
In a recent paper, Dumenil and Levy  have shown that the economic rate of return and the average accounting rate of return for the aggregate U.S.
The book will appeal most successfully to business school students with some economics background, because there is enough unexplained jargon ("internal rate of return,' "gross accounting rate of return') to put off general undergraduates and not enough documentation (thirty-nine total notes to fifteen separate sources) to persuade general historians.
Currently, MCaffeine does an accounting rate of return (ARR) business of Rs.
Candidates may also be required to evaluate the same investment using return on capital employed or accounting rate of return. These are profit-based measures, so they require a forecast income statement.
They explain the development of the model, its basic data, the net present value model, project risk profile and strategic index, examine a case study, give procedures for two empirical and pragmatic evaluation, describe the accounting rate of return and show how to calculate the modified internal rate of return from the net present value.

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