average rate of return

• What does ARR stand for in investment analysis?

  Average Rate of Return
• What does ARR measure in the context of investments?

  It measures the average yearly profit generated by an investment as a percentage of the initial investment
• How does ARR help businesses?

  It helps businesses evaluate the profitability of different investments and decide where to allocate resources
• How is ARR calculated?

  ARR = \left( \frac{\text{Average Yearly Profit}}{\text{Initial Investment}} \right) \times 100
• What does a higher ARR indicate about an investment?

  A higher ARR indicates a more profitable investment
• Why is ARR useful in decision-making?

  It provides insight into how efficiently an investment is expected to perform relative to its cost
• What are the key components involved in calculating ARR?

  • Average Yearly Profit
  • Initial Investment
  • Formula: ARR = (Average Yearly Profit / Initial Investment) × 100
• an investment data would usually show:

  • The initial outlay (initial investment)
  • An estimate of yearly profit
  • An accumulated profit figure – a running total of the net value of the investment
• What is the sum invested?


  The initial amount of money invested in an investment.