Accounting rate of return

Okay kiddo, have you ever heard of the word "investment"? When you save your money in a piggy bank or a bank account, you can use that money to buy things you want in the future, like a toy or candy. But some grown-ups like to put their money into things called "investments" that can make them more money in the future!

When a grown-up puts their money into an investment, they want to know if it's a good investment or not. So they use something called an "accounting rate of return" to help them figure that out.

This is like measuring how much more money the grown-up will make from their investment compared to how much they put in. It's like if you had a lemonade stand and you wanted to know if you made more money than you spent on your ingredients.

So the accounting rate of return helps the grown-up see if their investment is worth it or not. If the rate of return is high, that means the grown-up will make a lot more money from their investment, which is good! But if it's low, that means they won't make as much, which might not be worth it.

Overall, the accounting rate of return is just a tool to help grown-ups decide if investing their money is a smart choice or not, and how much money they might make in the end.