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Why you use average invetsment in accounting rate of return technique?
Wiki User
∙ 14y ago
If the investment is derived from income, look at the return and make a choice
Wiki User
∙ 14y ago
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Why cannot the accounting rate of return be used as a reliable capital budgeting technique?
Because this computation attempts to calculate the average book value of an investment by simply averaging the initial and liquidation values.
The accounting rate of return on stockholders investments is measured by?
The accounting rate of return stockholders investments is measured by?
Limitation of accounting rate of return?
outline four limitation of the accounting rate of return method of appraising new investment.
Questions with 'how do you define budgetary capital expenditure also explain Pay back and accounting rate of return?
Average anual profit = average operating cash flow - depreciation
How is the accounting rate of return on stockholders investments measured?
return on equity
What is the return on capital employed?
Return on capital employed means an accounting ratio used in finance, valuation, and accounting. Not to be confused with return on equity, it is similar to return on assets yet takes into account sources of financing.
What are the limitations of accounting rate of return?
The AAR is good capital budgeting tool because managers can compare it to objective benchmarks. Yet one limitation is that ARR uses profit rather than cashflows, and it does not account for the time value of money (TVM)For more information on the accounting rate of return (AAR) please visit: http://www.drtaccounting.com/2008/03/calculate-average-accounting-return.html
What is the accounting entry for sales return under warranty?
The accounting entry for sales return under warranty is the accrued warranty liability. This entry is written under warranty expense.
Is sales return and return inwards same thing?
Yes. It is just another term used for in accounting.
What are the differences between accounting rate of return and internal rate of return?
Internal rate of return (IRR) is a discounted method used for Capital budgeting decisions (investment etc) while accounting rate of retun is a measure for calculating return for a one off payment. IRR is actually the discount rate that equates the Present value of the cash flows to the NPV of the project (investment) while accounting rate of return just gives the actual rate of return. Habib topu1910@gmail.com
What is return inwards in accounting?
Return Inwards in accounting means SALES that was returned in your business by your customers maybe because there's something wrong or the customer is not satisfied with the product. SALES is your revenue and is credit in nature. RETURN INWARDS / SALES RETURN is the opposite of SALES, therefore, it's an expense and is debit in nature.
Is financial accounting necessary?
Yes. If you mean by financial accounting, the accounting that calculates the cost of capital to the business and compare it to current, expected, and historic rates of return. Suppose a company is making 12% return; but borrowing money by using the owner's credit card at 22%? Be good to know that.
