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Accounting rate of return
Limitations of ARR in Investment Appraisal
December 11, 2023
What are the limitations of using the accounting rate of return (ARR) in capital budgeting?
ARR relies on accounting profits and doesn't consider the time value of money, leading to potential inaccuracies in investment appraisal. It may disregard cash flow timing and project duration, impacting the quality of investment decisions.
Tags : Accounting Rate of Return , Limitations , Investment Appraisal