The-definition.com

Definition

Annual rate of return technique

Annual rate of return technique determines the profitability of a capital expenditure by dividing expected annual net income by the average investment.

The annual rate of return technique is based directly on accounting data.

The formula for computing the annual rate of return is as follows.

Expected Annual Net Income ÷ Average Investment = Annual Rate of Return

Share it:  Cite

More from this Section

  • Merchandise purchases budget
    Merchandise purchases budget is the estimated cost of goods to be purchased by a merchandiser ...
  • Trade credit or open-book accounts
    Trade credit or open-book accounts refer business charge accounts that a selling firm ...
  • Cash budget
    The cash budget is a projection of anticipated cash flows. Because cash is so vital, this ...
  • Unlimited liability
    Each partner is personally and individually liable for all partnership liabilities. Creditor’s ...
  • Quality of earnings
    Quality of earnings provides full and transparent information that will not confuse or ...