Accounting Rate of Return Calculator

The accounting rate of return calculator or ARR calculator, is used to calculate a projects net income as a percentage of the investment in the project.

The calculation is carried out using the accounting rate of return formula, which takes the average annual net income over the term of the project and divides it by the average investment in the project.

ARR = Average annual net income / Average investment

Full details of how the method is used can be found in our accounting rate of return tutorial.

accounting rate of return calculator v 1

Using the Accounting Rate of Return Calculator

The Excel accounting rate of return calculator, available for download below, is used to compute the accounting rate of return by entering details relating to the net income and investment in the project.

The calculator is used as follows:

  1. Enter the total net income. The total net income is the income net of all expenses (including depreciation) over the term of the project.
  2. Enter the investment term. The investment term is the number of years over which investment in the project takes place. The accounting return calculator works out the average annual net income.
  3. Enter the initial investment, working capital and scrap value. Enter the monetary amounts invested at the start of the project and the working capital used during the project term. The scrap value is the amount the investment is worth at the end of projects useful life.

    The calculator uses the ARR formula to calculate the average investment over the term of the project, and the accounting rate of return percentage.

Accounting Rate of Return Calculator Download

The accounting rate of return spreadsheet is available for download in Excel format by following the link below.

Notes and major health warnings
Users use this accounting rate of return calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of an ARR calculator that you might use when using the ARR method of capital budgeting. It is purely illustrative. This is not intended to reflect general standards or targets for any particular business, company or sector. If you do spot a mistake in this average accounting return calculator, please let us know and we will try to fix it.
Last modified July 16th, 2019 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.

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