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GCSE Business · key term
The average annual profit from an investment expressed as a percentage of its original cost: .
Used by AQA and OCR
Paper 2
Revise: Capital Investment and Average Rate of ReturnAverage rate of return, or ARR, measures the average annual profit from an investment as a percentage of its initial cost. It helps a business judge the expected financial return and compare projects of different sizes.
Paper 2
The average annual profit from an investment expressed as a percentage of its initial cost.
Revise: Average Rate of ReturnAverage rate of return (ARR) measures the average annual profit from an investment as a percentage of its initial cost. Expressing the return as a percentage helps a business compare investments of different sizes.
Show each stage of your calculation: total profit if needed, average annual profit, then ARR.
Use average annual profit, not total profit over the project's life, in the ARR formula.
Give ARR as a percentage, and follow any rounding instruction in the question.
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