# Accounting rate of return

Evaluate the performance of your investments and make informed financial decisions with the help of our ARR Calculator.

The Accounting Rate of Return (ARR), also referred to as the Average Rate of Return, measures the profitability of an investment by calculating the percentage of profit generated over a specified period. This period can be customized according to individual needs. For instance, if the total return (revenue – expenses, including depreciation) over a span of n years amounts to $70 from an initial investment of$100, the ARR would be 70%. The ARR formula is derived by subtracting the incremental expenses (including depreciation) from the incremental revenue and dividing it by the initial investment.

Incremental Revenue
$Incremental Expenses$
Initial Investment
$Final Investment$
Number of Years
\$
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16 Number of calculations

• Depreciation = (Initial Investment – Final Investment) / No. of Years
• Profit = (Incremental Revenue – Incremental Expenses) / Depreciation
• ARR = Profit / Initial Investment

Use our Accounting Rate of Return (ARR) Calculator to measure the profitability of your investments. Simply enter the required financial data, such as initial investment and average annual net income, and our calculator will provide you with the ARR percentage. Evaluate the performance of your investments and make informed financial decisions with the help of our ARR Calculator.