accounting rate of return

accounting rate of return definition - business

accounting rate of return

Average annual profits divided by the average amount of money invested in assets that produce the profits. This is generally considered an inferior measure of profitability compared to net present value and internal rate of return, which use discounted cash flows rather than accounting profits.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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