average rate of return
What average rate of return means in Business A-Level, as defined for AQA.
Definitions of average rate of return
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Reference: AQA
Total net profit over the project's life divided by the number of years, then divided by the initial outlay and multiplied by 100.
Divides the average annual profit by the initial cost and gives a percentage that can be set beside the cost of borrowing.
Average annual profit as a percentage of the initial investment, used to quantify the case where the data allows it.
Average annual profit divided by the initial outlay times one hundred, quoted as a percentage.
Topics that use average rate of return
- Analysing strategic options: investment appraisal (AQA A-Level)
- Annex: quantitative skills in business (AQA A-Level)
- Assessing innovation (AQA A-Level)
- Making operational decisions to improve performance: increasing efficiency and productivity (AQA A-Level)
Related terms
- net present value
- benchmarking
- break-even output
- payback period
- analysis
- averages
- axes and scales
- base year
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