Average rate of return=profitabiliry of an investment
ARR % = Average annual profit/cost of investment x 100
To calculate average annual profit=total profit/no of yrs
Before a business makes a decision, it may look at different data types to make it aware of the impact of the decision. Businesses use:
FINANCIAL DATA: E.g-cash flow forecasts alert business of any potential cash flow problems calculations on profit and loss help it see if it should lower cost or try increase revenue. Predicting ARR helps them deduce if an investment is profitable enough
MARKETING DATA: Business understands customers and their preferences through primary and secondary market research
MARKET DATA: E.g-knowing market share of different businesses, prices of competitors products means business decides if they should lower price/ increase market share
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