The Advantages & Disadvantages, ARR Method

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -10

6.3 THE ADVANTAGES & DISADVANTAGES, ARR METHOD

The ARR has some disadvantages which are related with the project profits timing. The capital is reserved until starting the project to get more benefit. Investors have to be awake of the advantages of before the time repayments that will use for other projects.

Some other disadvantages are as below:

• Profits are more important than the cash flows for ARR method. 
• This method prefers the relative measure than the absolute.
• The ARR technique deny the money value timing

In addition, some advantages:

•   Easy and clear method to apply
•  Financial statements help to estimate the profits
•  The ARR method is effective in all life of the project
•  The ARR technique is based on the profit concept; therefore, it is clear to    understand the benefits of the appraisal method for workers.
•  It is easy to match and compare more than one project in this method.

Exclusive Projects Mutually and ARR

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -9

6.2 EXCLUSIVE PROJECTS MUTUALLY & ARR

In this method, Average Rate of Return is useful to compare few different projects.

If one of the project has higher Average Rate of Return, the organisation will select that project. Only reason is that new ARR has to be bigger than the expected ARR.

Calculating ARR, The Accounting Rate Of Return

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -8

6.   THE ACCOUNTING RATE OF RETURN (ARR)

6.1 CALCULATING (ARR)

The accounting rate of return method (ARR) is used for increasing the success and yield of the investment projects. If the project surpass their rate of return (ARR) expectations, it can be satisfactory. 

The formulate ARR is established on initial investment or else average investment. This investment technique applies the profits of the project as an alternative of cash flow.