The ACR Calculator assists in determining the annual revenue generated from a contract by dividing the total contract value by the duration of the contract in years. This tool is essential for businesses that rely on long-term contracts for revenue, as it helps them understand the annual contribution of each contract to their overall revenue. By using this calculator, financial analysts can easily assess and compare the profitability of different contracts.
ACR Calculator Formula
To calculate the Annual Contract Revenue (ACR), use the following formula:
Detailed Breakdown:
- Determine the Total Contract Value (TCV):
- TCV is the sum of all payments received over the contract period.
- If payments are made periodically (e.g., monthly), sum all periodic payments.
- Example: If monthly payments are $1000 for 3 years, TCV = $1000 * 12 * 3 = $36,000.
- Calculate the Total Contract Duration in Years (TCD):
- TCD is the total number of days in the contract period divide by 365.
- If the contract period is in months or days, convert it to years.
- Example: If the contract period is 3 years, TCD = 3 years. If the contract period is 540 days, TCD = 540 / 365 ≈ 1.48 years.
- Apply the ACR Formula:
- ACR = Total Contract Value / Total Contract Duration in Years.
- Example: Using the above values, ACR = $36,000 / 3 = $12,000 per year.
Putting it all together, the detailed formula for ACR is: ACR = (Sum of Periodic Payments * Number of Periods) / (Total Number of Days in Contract / 365)
Conversion Table for Common Calculations
| Total Contract Value (TCV) | Contract Duration (Years) | ACR ($ per Year) |
|---|---|---|
| $10,000 | 1 | $10,000 |
| $24,000 | 2 | $12,000 |
| $36,000 | 3 | $12,000 |
| $60,000 | 4 | $15,000 |
| $100,000 | 5 | $20,000 |
Example of ACR Calculator
Scenario: Calculating the ACR for a contract with a total value of $50,000 over 2.5 years.
- Total Contract Value (TCV): $50,000
- Contract Duration in Years (TCD): 2.5
- Calculation:
- ACR = $50,000 / 2.5
- ACR = $20,000 per year
So, the annual contract revenue is $20,000.
Most Common FAQs
ACR is the yearly revenue generated from a contract. It is important because it helps businesses understand the annual financial contribution of long-term agreements.
Input the total contract value and the total contract duration in years into the calculator. It will automatically compute the annual contract revenue.
Yes, the calculator can be used for any contract period as long as the total value and duration are known.