What is the 'Accounting Rate of Return  ARR'
The accounting rate of return (ARR) is the amount of profit, or return, that an individual can expect based on an investment made. Accounting rate of return divides the average profit by the initial investment in order to get the ratio or return that can be expected. This allows an investor or business owner to easily compare the profit potential for projects, products and investments.
BREAKING DOWN 'Accounting Rate of Return  ARR'
ARR is considered a straightline method of gathering quantitative information. While this is a positive measure in some aspects, its lack of sophistication is also a drawback. ARR does not consider the time value of money, which means that returns taken in during later years may be worth less than those taken in now, and does not consider cash flows, which can be an integral part of maintaining a business.

Return
The gain or loss of a security in a particular period. The return ... 
Return Of Capital
A return from an investment that is not considered income. The ... 
Yearly Rate Of Return Method
More commonly referred to as annual percentage rate. It is the ... 
AfterTax Real Rate Of Return
The actual financial benefit of an investment after accounting ... 
InflationAdjusted Return
A measure of return that accounts for the return period's inflation ... 
Rate Of Return
The gain or loss on an investment over a specified period, expressed ...

Professionals
How To Measure Returns On The Series 65 Exam
An investor who is evaluating the performance of a portfolio manager must take into consideration the impact that any contributions or withdrawals made by the investor will have on the overall ... 
Fundamental Analysis
Understanding the Internal Rate of Return Rule
The internal rate of return rule is a popular method used to compare investments or projects. 
Term
What's a Real Rate of Return?
A real rate of return is an annual percentage investment return thatâ€™s adjusted for inflation, taxes or other factors. 
Fundamental Analysis
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
Investing Basics
Calculating Annualized Total Return
The annualized total return is the average return of an investment each year over a given time period. 
Retirement
The Pros And Cons Of Money Market Funds
Find out whether stocking your money in these accounts will stand up to the test of time. 
Term
What's a Return of Capital?
A return of capital is an investment return that is not considered income. 
Term
Understanding Total Returns
Total return measures the rate of return earned from an investment over a period of time. 
Investing
4 Benefits of Holding Stocks for the Long Term
Discover some of the benefits that come from buying and holding stocks for longer periods of time, such as tax savings and risk minimization. 
Investing Basics
3 Ways To Evaluate the Performance of Alternatives
Learn about three ways to measure the performance of alternative investments. See how the commonly used Sharpe ratio has drawbacks in measuring volatility.

What are some of the limitations of only looking at the rate of return for an investment?
Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >> 
What is the difference between profitability and profit?
Calculating company profit and profitability are not one and the same, and investors should understand the difference between ... Read Answer >> 
What is the difference between a company's annual return and its annualized return?
Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >> 
How is the expected market return determined when calculating market risk premium?
Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >> 
What's the difference between absolute and relative return?
Knowing whether a fund manager or broker is doing a good job can be a challenge for some investors. It's difficult to define ... Read Answer >> 
What can cause the rate of return to be negative?
Learn how poor company or sector performance, economic turmoil and inflation can cause the rate of return on an investment ... Read Answer >>