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Money rate of return |
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Money rate of returnAnnual money return as a percentage of asset value.Money rate of return Similar MatchesReturn on capital employedReturn on capital employedA measure of a company's profitability. It may be defined as:Earnings before interest and tax divided by total capital employed plus short term borrowings minus total intangibles.ROCE takes all the assets employed in the business, including borrowings, and measures the return the company made on them. If a company has a low ROCE, it is using its resources inefficiently, even if its profit margin is high.Calculation: multiply operating profit by 100, and divide the result by total capital employedExample: Company A made an operating profit of £897m on total capital employed of £4,342m. ROCE was therefore (897 x 100) / 4,342= 20.66%Yardstick: A company's ROCE should be higher than the return on gilts (the benchmark for a risk-free investment return). And unless it is higher than the cost of borrowing, any increase in the company's borrowings or the general level of interest rates will reduce shareholders' earnings. A ROCE of 20% or more is considered very good. Increasing returns to scaleIncreasing returns to scaleA property of a production function such that changing all inputs by the same proportion changes output more than in proportion. Common forms include homogeneous of degree greater than one and production with constant marginal cost but positive fixed cost. Also called economies of scale, scale economies, and simply increasing returns. Contrasts with decreasing returns and constant returns. Inheritance tax returnInheritance tax returnTax form required to determine the amount of state tax due on an inheritance. Cumulative abnormal return (CAR)Cumulative abnormal return (CAR)Sum of the differences between the expected return on a stock (systematic risk multiplied by the realized market return) and the actual return often used to evaluate the impact of news on a stock price. Joint tax returnJoint tax returnTax return filed by two people, usually spouses. Further SuggestionsFair rate of returnReturn on assets (ROA) Law of Diminishing Returns Return to capital Excess return on the market portfolio Real return Return on investment (ROI) Return internal rate of return Risk return tradeoff Incremental internal rate of return Safety net return Holding period return Average rate of return (ARR) Total dollar return return on equity Required return return on investment real return Return on equity (ROE) Average accounting return tax return After tax real rate of return Real rate of return Required Rate of Return (RRR) |
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