accounting rate of return

accounting rate of return (ARR) An accounting ratio that expresses the profit of an organization before interest and taxation, usually for a year, as a percentage of the capital employed at the end of the period. Variants of the measure include using profit after interest and taxation, equity capital employed, and the average of opening and closing capital employed for the period. Although ARR can be used to forecast return on an investment project, discounted cash flow measures are acknowledged to be superior for this purpose.