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 ARRRead 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!