Advantages

• The method is easy to calculate and easy to understand.
• It makes a clear picture about the profitability of the project
• It it uses to measure the current performance of the project
• It facilitates a comparison of new product project vidyut of cost reducing project and any other projects of competitive nature.
• The method is based on accounting profit is measure the profitability of the investment

Disadvantages

• It ignores the time value of money and cash flow from investment
• Cannot appraise the project pay the installment of the investments have been made more than two times and in multiple parts
• To calculate the rate of return only ARR method is not required

• It does not consider the terminal value of the project