The Accounting Rate of Return (ARR) is an accounting metric that measures the profitability of an organization by comparing the profit before interest and taxation to the capital employed over a specified period. Commonly used variants include profit after interest and taxation and average capital employed for the period.
Capital Employed is the total amount of capital that a company uses to generate profits and includes shareholder's equity and long-term debt, or the sum of fixed and net current assets. This metric is pivotal in ratio analysis for assessing the efficiency and profitability of a company's capital investments.
A measure of the capital employed that is under the direct influence of a divisional manager, used to accurately assess performance.
