Average Rate of Return Formula

The financial ratio which is used in capital budgeting is called as the average rate of return. It is also called an accounting rate of return or ARR. This page provides you the average rate of return formula which guides you to calculate ARR with the known values of selling price and original cost, also the average rate of return for every year formula is also available here which additionally requires the input of the number of years to hold the stock.

Formula:

Average Rate of Return (ARR) = ((s - o) / o) × 100
Average Rate of Return for Every Year =( ((s - o) / o) / a) × 100


Where,

S = Selling Price
O = Original Cost
A = Number of years to hold the Stock

Related Calculator:

The average rate of return formula on this page will be a useful one for the start-up business people to calculate their average rate of return with known values. Also, you can click on the calculator link above to know the resultant value easily.


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