ARR (Average Rate of Return or Accounting Rate Of Return)
ARR, or Average Rate of Return (also known as Accounting Rate of Return), is a business term used in procurement to measure financial performance. It indicates the expected revenue generated from an investment relative to its cost over a certain period of time. The higher the ARR, the higher the profitability of the venture; conversely, the lower the ARR, the less profitable it will be. ARR can be calculated by dividing the net income generated by the investment over its total capital cost. By utilizing this metric, organizations are able to make informed decisions regarding their investments and identify opportunities for increased profitability.
