alleryStart learning →A: profit Rs 40,000 on average investment Rs 2,00,000. B: Rs 54,000 on Rs 3,60,000. Higher ARR?
AB at 15%
BA at 20%
CA at 40%
DB at 54%
Answer & Solution
Correct answer: B. A at 20%
A earns 40,000 / 2,00,000 = 20 percent while B earns 54,000 / 3,60,000 = 15 percent, so A has the higher ARR even though B earns more rupees.
Keep practising Accounting Rate of Return
Browse all Accounting Rate of Return questions for CA Inter, or explore more Financial Management topics.
Related questions
Which measures do economists prefer over payback for return?Rs 9,00,000 is invested and net cash flow is Rs 1,80,000 a year. Payback?Cost Rs 12,00,000 and scrap Rs 2,00,000. Average investment under ARR?Cost Rs 3,00,000, scrap Rs 60,000, 4 years, total profit Rs 1,44,000. ARR?Which goal underlies capital budgeting in corporate finance?Capital budgeting mainly concerns which type of spending?Companies create value when their return on capital is above what?What drawback makes older businesses show a higher ROCE?