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.
Profitability and profitability ratios are essential metrics used to measure the efficiency and success of a business in generating earnings relative to various financial aspects like sales, assets, and equity.
Return on Invested Capital (ROIC) is a profitability ratio that assesses how efficiently a company uses its total capital—including common and preferred equity as well as long-term funded debt—to generate profits.
