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 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
What is an accounting rate of return?
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.
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