Practice Accounting Rate of Return (ARR) - 25.5.A.2 | 25. Capital Budgeting Techniques | Management 1 (Organizational Behaviour/Finance & Accounting)
K12 Students

Academics

AI-Powered learning for Grades 8–12, aligned with major Indian and international curricula.

Professionals

Professional Courses

Industry-relevant training in Business, Technology, and Design to help professionals and graduates upskill for real-world careers.

Games

Interactive Games

Fun, engaging games to boost memory, math fluency, typing speed, and English skills—perfect for learners of all ages.

Typing
Memory
Math
English Adventures
Knowledge

25.5.A.2 - Accounting Rate of Return (ARR)

Enroll to start learning

You’ve not yet enrolled in this course. Please enroll for free to listen to audio lessons, classroom podcasts and take practice test.

Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What does ARR stand for?

💡 Hint: Think of an acronym that combines accounting and returns.

Question 2

Easy

If an investment of $80,000 yields $8,000 annually, what is the ARR?

💡 Hint: Use the formula ARR = (Annual Profit / Initial Investment) x 100.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What is the formula for ARR?

💡 Hint: Remember, it's all about the average profit compared to what was initially spent.

Question 2

True or False: The Accounting Rate of Return considers the time value of money.

  • True
  • False

💡 Hint: Think about whether money earned today is worth the same as money earned in the future.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

Imagine a tech startup is evaluating two projects: Project A requires an investment of $250,000 with an average expected annual profit of $35,000, while Project B needs $300,000 with an expected annual profit of $50,000. Calculate the ARR for both projects and determine which project appears more attractive based on ARR. Consider what other factors might influence this decision.

💡 Hint: Remember to calculate each ARR to compare effectively!

Question 2

A company has to choose between a short-term project with a quick ARR and a long-term project with higher NPV. Project X has an ARR of 25%, while Project Y has an NPV of $50,000 but a lower ARR. Discuss the potential decision-making pitfalls when using solely ARR to evaluate Project X versus Project Y.

💡 Hint: Think about the long-term benefits versus immediate returns.

Challenge and get performance evaluation