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# Rate of return

The percentage of an asset's value that the owner of the asset earns, usually per year.

# Rate Of Return

The annual percentage of return on investment on income property.

# Rate of return

Calculated as the (value now minus value at time of purchase) divided by value at time of purchase. For equities, we often include dividends with the value now. See also: Return, annual rate of return.

Rate of return

# Return on capital employed

Return on capital employed

A 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.

# External increasing returns to scale

External increasing returns to scale

External economies of scale.

# Systematic Return

Systematic Return

The part of the return dependent on the benchmark return. We can break excess returns into two components: systematic and residual. The systematic return is the beta times the benchmark excess return.

# Dividend Discount Return

Dividend Discount Return

The rate of return which equates the present value of future expected dividends with the current market price of a security.

# Return on equity

Return on equity

The adjusted profit of a company divided by its equity. For instance, if the adjusted profit of a company is £1m and Equity is £10m, the Return on Equity is 10%.Adjusted profit is the profit of the company adjusted to exclude the impact of non-recurring exceptional gains, losses, income and charges. The figure can be found in the company's Profit and Loss Account. Equity is the total of ordinary share capital plus reserves, and both figures appear in the company's Balance Sheet. In calculating Return on Equity, you can use the Equity at the end of the year or the average between the opening and closing equity.

# Further Suggestions

Expected future return
Cumulative total return
return on total assets
After tax real rate of return
Consolidated tax return
Required Rate of Return (RRR)
total return
Portfolio internal rate of return
Individual tax return
joint tax return
Return of capital
Excess return on the market portfolio
Average accounting return
Return
Diminishing returns
Return on sales