OCR GCSE Business · J204
Paper 2
Revise: Average Rate of ReturnThe initial cost alone does not tell the owner whether an investment is financially attractive: they also need to consider the profit it is expected to produce.
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GCSE Business · key term
Money spent on an asset or project in the expectation of generating future benefits, such as additional profit.
Used by OCR
Paper 2
Revise: Average Rate of ReturnThe initial cost alone does not tell the owner whether an investment is financially attractive: they also need to consider the profit it is expected to produce.
Subtract the investment cost only if you still need to calculate total profit. Do not subtract it again from a figure already described as profit.
When interpreting ARR, link your conclusion to the investment’s forecast return, alternatives and risk rather than simply saying that a higher percentage is better.
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