What is an Average Accounting Return?
Average accounting returns are a calculation that demonstrates the measure or rate of return on an investment within a specified period of time. There are several factors that go into arriving at an average accounting return, which in turn make the calculation helpful in several different applications. In order to process an average accounting return on investments, it is important to consider the expenses associated with the investment. For example, a number of financial experts choose to include depreciation of the asset as part of the calculation. The depreciation will impact the average book value that is currently associated with the investment, and form the foundation for the application of other factors to the equation. After the book value and depreciation have been accounted for, the next factor to apply to calculating the average accounting return is to look at the total earnings that have been generated by the asset during the time period under consideration. Subtract any ta
