The Average accounting rate of return denotes the return expected on an investment relative to its cost. It is a quick way to calculate an investment’s profitability. To obtain the average accounting rate of return, we divide the average net income by the average book value.
Some other related topics you might be interested to explore are NPV, IRR, Payback Period, and Discounted Payback Period.
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Average Accounting Rate of Return is among the topics included in the Corporate Finance module of the CFA Level 1 Curriculum.
