Investment Decision-Making: Accounting Rate of Return (ARR)
Interactive

Investment Decision-Making: Accounting Rate of Return (ARR)

Intuition Publishing
Updated Sep 24, 2020

Accounting rate of return is net income divided by the book value of an investment. The result is a percentage, which can then be compared with either a hurdle rate. Here we explore the ARR formula and its many variations, and discuss the strengths and weakness of the ARR approach.