Accounting Rate of Return (ARR) | Example 2 | Explained with Example

In this lesson, we go through a second example of the Accounting Rate of Return (ARR). We explain what it is, why it is calculated, and the formula for the Accounting Rate of Return (ARR) when you are given uneven cash flows as well as a thorough example. We show how to go from cash flows to profits. We also go through the advantages and disadvantages of the Accounting Rate of Return (ARR).
Timestamps:
Accounting Rate of Return Definition: 00:00
Interpret / Analyze the Accounting Rate of Return: 01:02
Accounting Rate of Return Formula: 01:42
Advantages and Disadvantages of the Accounting Rate of Return: 09:15
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[@dannylandela8338]

Excellent tutorial

[@greatnessurey9854]

In the case there's no salvage value. What do I do?

[@macdonaldnko6493]

Thank you sir.

[@danielamornortey2346]

What if you were giving cashflow and initial investment and cost of capital in percentage

[@blizz94]

So i have a question, i was given resale value and disposal value, can i get depreciation from that

[@phumlilekhumalo-iz8xg]

What if you haven't been given the depreciation percentage, the how to calculate profits from cash flows

[@winnieadhiambo5630]

Hello we have some questions where we're not given given salvage

[@aweleogweh5592]

what of if they give you tax rate and you have a mutually exclusive project

[@kalindinaidoo5018]

What if you don't get depreciation or scrap value in the question and you only get Cash Flows? How do you calculate Profit?

[@Counttuts]

It depends on what is given in the question. You are most likely given enough information to calculate depreciation.

[@jordanaduncan2895]

i am confused with the question that i have. if the figures i was given are expected profits per annum, do i still calculate depreciation on these figures? and if i am doing so, is it possible to get negative figures? (when calculated, the depreciation is greater than the expected profit figures per annum)...help! :(

[@jordanaduncan2895]

or can i just add all the expected profits per annum and divide by the years to get the av. profit?..and will this include residual value?

[@yourgirlstyebrooke]

But what if you are given tax rate???

[@yourgirlstyebrooke]

Tax rate and cash flows??? We need a tutorial on this please

[@yourgirlstyebrooke]

I always thought Average investment=(initial investment - salvage value)/2

[@Counttuts]

That would be incorrect. Salvage value is added and not subtracted from the initial investment.

[@yourgirlstyebrooke]

Counttuts you are very right... thank you... you are a genius