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
Category: Accounting & Auditing
Previous: ← Internal rate of return (IRR)
Next: Median →
More from this Section
- Expenses
Expenses are the cost of assets consumed or services used in the process of earning revenue. ... - Voucher register & Check register
An employee in accounts payable records the voucher which in a journal called a voucher ... - Time ticket
The time ticket is a document that indicates the employee, the hours worked, the account ... - Special journal
Special journal refers to a journal that records similar types of transactions, such as ... - Equity method
Equity method is an accounting method in which the investment is common stock is initially ...