Abiblo Finance - Accounting Rate of Return

​Accounting Rate of Return 
Accounting rate of return is an accounting ratio. It is an expression of the profit of an organization before taxation and interest for a year as a percentage of the capital employed at the end of the period. 
 
Variants of the measure include the equity capital employed, the profit after interest and taxation and the average of the closing and opening of the capital employed for the period. 
 
This measure can be useful to forecast the return of an investment project. However, discounted cash flow measures are known to be more superior for this purpose.