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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Accounting Rate Of Return

Definition:

What's a given business or subdivision or investment worth over its lifetime? See hurdle rate, discounted cash flow, and net present value. Those terms explain the concept better than we can here. The problem with ARR is that it ignores the time value of money - remember that a buck today is worth more than a buck tomorrow. ARR methods of valuing things are also problematic in that they focus on profits - which are definable many ways - rather than cash flows, which are usually much less subject to accounting shenanigans.

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