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Hurdle Rate

The minimum return a proposed investment must clear to be approved.

Area
Accounting
Also known as
minimum acceptable rate of return, required rate of return
In this area
51 terms of 257

A hurdle rate is the threshold return a capital project has to beat before it is funded, normally set at or above the cost of capital. Proposals below it are declined regardless of how attractive they look in isolation.

It stops capital budgeting becoming a contest of enthusiasm. Applied consistently it also makes unlike proposals — a second forklift against a warehouse extension — directly comparable.

Related terms

Total Cost of Ownership

TCO

The full lifetime cost of a purchase, not just its price.

Hire Purchase

Acquiring an asset by instalments, taking ownership on the final payment.

Fixed Asset Register

The authoritative list of capital assets with cost, location and depreciation.

Budget Variance

The difference between budgeted and actual figures for a period.

More in Accounting

Accounts Payable (AP) Accounts Receivable (AR) Accrual Accounting Accrued Expense Aging Report Bad Debt Provision Balance Sheet Bank Reconciliation

Hurdle Rate is not just a definition here

Accounting runs on this vocabulary every day in AWRA OpsHub — 51 of our 257 glossary terms describe things the platform actually does.

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