Overview
This Accounting Rate of Return Template is an Excel template which helps you compute the return on an investment in project, asset or business. This is very simple-to-use template with the appropriate formulas set up. All you need to do is fill in the input cells in blue and the result will be generated for you.

What is Accounting Rate of Return?

Accounting rate of return (ARR) is calculated as the average net income generated by an asset divided by its average capital cost. This measure is usually expressed as an annual percentage figure and used to help companies decide the profitability of an investment (project, acquisition of assets/ business). This Accounting Rate of Return Template can be useful in determining whether or not to invest in a project. The implication of ARR is that when ARR of a project is equal to 10%, the project is expected to generate ten cents of net income for every dollar invested each year. By comparing ARR to the required rate of return (hurdle rate), a company can decide to accept the project if it's equal or greater than the rate or reject it if less than the rate.

Learn More About ARR

Read CFI's Accounting Rate of Return Guide to understand the concept of accounting rate of return, see examples of calculation, and watch the video explanation!
Share
Reviews Add a review
Avatar
Zulu Way

Nice ARR Excel file, thanks

More From Corporate Finance Institute®

Browse our top rated business templates. See All
Energy Industry Comps Template Energy Industry Comps Template
672
40
This energy industry comps template provides a guideline and example of what a comparables universe would look like for a…
Financial Institution Dividend Discount Model
1,248
50
The financial institution dividend discount model uses future dividends to find the implied share price. This model is based on…
Loan Payment Calculator
912
0
The loan payment calculator allows users to determine the principal and interest payment each month until the full balance of…
DDM - Excel Dividend Discount Model Template
1,054
78
The dividend discount model template allows investors to value a company base on future dividend payments. This is based on…
Non-directional trading strategy template Non-directional Trading Strategies Template
897
0
The non-directional trading strategies template allow users to determine the profit when buying options. This template focuses on non-directional strategies…
restructuring financial model template preview 1 Restructuring Financial Model Template
1,209
0
This restructuring financial model template is used to demonstrate the financial interactions behind the restructuring process. Adjust this model to…