GlossariesGCSE GlossariesGCSE Business GlossaryAverage Rate Of Return

Average Rate Of Return - GCSE Business Definition

Reviewed by: Lisa Eades

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The Average Rate of Return (ARR) is a financial technique used in business to evaluate the profitability of an investment or project. It is expressed as a percentage and calculated using the formula:

Average space Rate space of space return space equals space fraction numerator Average space yearly space profit over denominator Cost space of space investment end fraction space cross times 100 space space space space space space

For students studying GCSE Business, understanding the ARR is important as it helps in comparing the efficiency and potential returns of different investment opportunities. A higher ARR indicates a more profitable investment, making it a useful tool in financial decision-making. Understanding this concept aids students in assessing how businesses allocate resources effectively to maximise profits.

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Lisa Eades

Reviewer: Lisa Eades

Expertise: Business Content Creator

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

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