What question did this study set out to answer?

To explore how the accounting rate of return influences financial performance evaluation in companies.

March 18, 2026

The Role of the Accounting Rate of Return in Financial Statement Analysis.

Key Points

To explore how the accounting rate of return influences financial performance evaluation in companies.
Examined the relationship between accounting and economic rates of return
Derived an accounting-based formula for a firm's present value
Simplified the analysis using constant ARR and growth rates
Identified the uses and limitations of derived equations in financial assessments.
Established a significant relationship between accounting and economic rates of return
Demonstrated the practical application of ARR in financial performance evaluations
Outlined the limitations of using accounting return metrics in financial analysis.

Abstract

Abstract Focuses on the use of the accounting rate of return (ARR) in evaluating the financial performance of companies in the United States. Relationship between accounting and economic rates of return; Derivation of accounting-based formula for the present value of a firm; Simplification with constant ARR and constant growth; Uses and limitations of derived equations in financial analysis.

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The Role of the Accounting Rate of Return in Financial Statement Analysis.

Key Points

Abstract

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