Enter the total profit registered, years of investment, initial investment, working capital, and scrap value into the calculator. The calculator will determine the accounting rate of return.

- Accounting Profit Calculator
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- Profitability Index Calculator
- Expected Rate of Return Calculator

## Accounting Rate of Return Formula

The following formula is used to calculate the accounting rate of return of an asset or business.

ARR = (RP / YOI) / [(IV + WC + SV)/2] *100

- Where ARR is the accounting rate of return (%)
- RP is the registered profit
- YOI is the years of investment
- IV is the initial investment
- WC is the working capital
- SV is the scrap value

## Accounting Rate of Return Definition

An accounting rate of return is a measure of how profitable any given investment is. It’s more in depth than a typical ROI formula, as it takes into account working capital and scrap value. The higher the ARR the better the investment in 99% of cases.

## Accounting Rate of Return Example

How to calculate accounting rate of return?

**First, determine the registered profit.**Measure the registered profit.

**Next, determine the years of investment.**Determine the total years of the investment.

**Next, determine the initial investment.**Calculate the value of the initial investment.

**Next, determine the working capital.**Calculate the total working capital of the business.

**Next, determine the scrap value.**Calculate the scrap value of the assets in the business.

**Finally, calculate the accounting rate of return.**Using the formula above, calculate the ARR.

## FAQ

**What is an accounting rate of return?**

An accounting rate of return, or ARR for short, is a measure of how profitable a business is based on the investment in the business and the registered profit.