Definition of Annualized holding period return

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

Abnormal returns

Part of the return that is not due to systematic influences (market wide influences). In
other words, abnormal returns are above those predicted by the market movement alone. Related: excess
returns.

Absolute Right of Return

Goods may be returned to the seller by the purchaser without restrictions.

Accounting period

The period of time for which financial statements are produced – see also financial year.

Accounting rate of return (ARR)

A method of investment appraisal that measures
the profit generated as a percentage of the
investment – see return on investment.

accounting rate of return (ARR)

the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

annual return

The fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns.

Annualized gain

If stock X appreciates 1.5% in one month, the annualized gain for that sock over a twelve
month period is 12*1.5% = 18%. Compounded over the twelve month period, the gain is (1.015)^12 = 19.6%.

Annuity Period

The time between each payment under an annuity.

Arithmetic average (mean) rate of return

Arithmetic mean return.

Arithmetic mean return

An average of the subperiod returns, calculated by summing the subperiod returns
and dividing by he number of subperiods.

Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.

Average Amortization Period

The average useful life of a company's collective amortizable asset base.

Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

Average rate of return (ARR)

The ratio of the average cash inflow to the amount invested.

book rate of return

Accounting income divided by book value.
Also called accounting rate of return.

Book Returns

Book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.

CARs (cumulative abnormal returns)

a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
This is typically used in control and takeover studies, where stockholders are paid a premium for being taken over. Starting some time period before the takeover (often five days before the first announced bid, but sometimes a longer period), the researchers calculate the actual daily stock returns for the target firm and subtract out the expected market returns (usually calculated using the firm’s beta and applying it to overall market movements during the time period under observation).
The excess actual return over the capital asset pricing model-determined expected return market is called an ‘‘abnormal return.’’ The cumulation of the daily abnormal returns over the time period under observation is the CAR. The term CAR(-5, 0) means the CAR calculated from five days before the
announcement to the day of announcement. The CAR(-1, 0) is a control premium, although Mergerstat generally uses the stock price five days before announcement rather than one day before announcement as the denominator in its control premium calculation. However, the CAR for any period other than (-1, 0) is not mathematically equivalent to a control premium.

Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.

compounding period

the time between each interest computation

Credit period

The length of time for which the customer is granted credit.

Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.

Cross holdings

One corporation holds shares in another firm.

Cumulative abnormal return (CAR)

Sum of the differences between the expected return on a stock and the
actual return that comes from the release of news to the market.

Discount period

The period during which a customer can deduct the discount from the net amount of the bill
when making payment.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Dollar return

The return realized on a portfolio for any evaluation period, including (1) the change in market
value of the portfolio and (2) any distributions made from the portfolio during that period.

Dollar-weighted rate of return

Also called the internal rate of return, the interest rate that will make the
present value of the cash flows from all the subperiods in the evaluation period plus the terminal market value
of the portfolio equal to the initial market value of the portfolio.

Evaluation period

The time interval over which a money manager's performance is evaluated.

Ex post return

Related: holding period return

Exante return

The expected return of a portfolio based on the expected returns of its component assets and
their weights.

Excess return on the market portfolio

The difference between the return on the market portfolio and the
riskless rate.

Excess returns

Also called abnormal returns, returns in excess of those required by some asset pricing model.

Expected future return

The return that is expected to be earned on an asset in the future. Also called the
expected return.

Expected return

The return expected on a risky asset based on a probability distribution for the possible rates
of return. Expected return equals some risk free rate (generally the prevailing U.S. Treasury note or bond rate)
plus a risk premium (the difference between the historic market return, based upon a well diversified index
such as the S&P500 and historic U.S. Treasury bond) multiplied by the assets beta.

Expected Return

The total amount of money (return) an investor anticipates to receive from an investment.

Expected return-beta relationship

Implication of the CAPM that security risk premiums will be
proportional to beta.

Expected return on investment

The return one can expect to earn on an investment. See: capital asset
pricing model.

Extended Amortization Period

An amortization period that continues beyond a long-lived asset's economic useful life.

Extended Amortization Periods

Amortizing capitalized expenditures over estimated useful lives that are unduly optimistic.

Full Credit Period

The period of trade credit given by a supplier to its customer.

Geometric mean return

Also called the time weighted rate of return, a measure of the compounded rate of
growth of the initial portfolio market value during the evaluation period, assuming that all cash distributions
are reinvested in the portfolio. It is computed by taking the geometric average of the portfolio subperiod
returns.

Grace Period

A specific period of time after a premium payment is due during which the policy owner may make a payment, and during which, the protection of the policy continues. The grace period usually ends in 30 days.

Grace Period

Length of time during which repayments of loan principal are excused. Usually occurs at the start of the loan period.

Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

Holding period

Length of time that an individual holds a security.

Holding period return

The rate of return over a given period.

Horizon return

Total return over a given horizon.

Incremental internal rate of return

IRR on the incremental investment from choosing a large project
instead of a smaller project.

Internal rate of return

Dollar-weighted rate of return. Discount rate at which net present value (NPV)
investment is zero. The rate at which a bond's future cash flows, discounted back to today, equals its price.

Internal rate of return

a. The average annual yield earned by an investment during the period held.
b. The effective rate of interest on a loan.
c. The discount rate in discounted cash flow analysis.
d. The rate that adjusts the value of future cash receipts earned by an investment so that interest earned equals the original cost.
See Yield to maturity.

Internal rate of return

The rate of return at which the present value of a series of future
cash flows equals the present value of all associated costs. This measure is most
commonly used in capital budgeting.

Internal rate of return (IRR)

A discounted cash flow technique used for investment appraisal that calculates the effective cost of capital that produces a net present value of zero from a series of future cash flows and an
initial capital investment.

internal rate of return (IRR)

The precise discount rate that makes the
present value (PV) of the future cash returns from a capital investment
exactly equal to the initial amount of capital invested. If IRR is higher
than the company’s cost-of-capital rate, the investment is an attractive
opportunity; if less, the investment is substandard from the cost-ofcapital
point of view.

Internal Rate of Return (IRR)

The discount rate that equates the present value of the net cash
inflows with the present value of the net cash outflows
(investments). The IRR measures the profitability (rate of return) of
an investment in a project or security.

internal rate of return (IRR)

the expected or actual rate of
return from a project based on, respectively, the assumed
or actual cash flows; the discount rate at which the net
present value of the cash flows equals zero

internal rate of return (IRR)

Discount rate at which project NPV = 0.

Inventory returns

Inventory returned from a customer for any reason. This receipt
is handled differently from a standard inventory receipt, typically into an inspection
area, from which it may be returned to stock, reworked, or scrapped.

Leveraged required return

The required return on an investment when the investment is financed partially by debt.

Market return

The return on the market portfolio.

Money rate of return

Annual money return as a percentage of asset value.

Multiperiod immunization

A portfolio strategy in which a portfolio is created that will be capable of
satisfying more than one predetermined future liability regardless if interest rates change.

Multiple rates of return

More than one rate of return from the same project that make the net present value
of the project equal to zero. This situation arises when the IRR method is used for a project in which negative
cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.

Net period

The period of time between the end of the discount period and the date payment is due.

Neutral period

In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
start or end on either a Friday or the day before a holiday.

Odd first or last period

Fixed-income securities may be purchased on dates
that do not coincide with coupon or payment dates. The length of the first and
last periods may differ from the regular period between coupons, and thus the
bond owner is not entitled to the full value of the coupon for that period.
Instead, the coupon is pro-rated according to how long the bond is held during
that period.

Payback Period

The number of years necessary for the net cash flows of an
investment to equal the initial cash outlay

payback period

the time it takes an investor to recoup an
original investment through cash flows from a project

payback period

Time until cash flows recover the initial investment of the project.

period cost

cost other than one associated with making or acquiring inventory

Period costs

The costs that relate to a period of time.

periodic compensation

a pay plan based on the time spent on the task rather than the work accomplished

Periodic inventory

A physical inventory count taken on a repetitive basis.

Periodic inventory system

An inventory system in which the balance in the Inventory account is adjusted for the units sold only at the end of the period.

Portfolio internal rate of return

The rate of return computed by first determining the cash flows for all the
bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows
equal to the market value of the portfolio.

PPF (periodic perpetuity factor)

a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.

Purchase returns

A contra account that reduces purchases by the amount of items purchased that were subsequently returned.

rate of return

Total income per period per dollar invested.

Rate of Return

return on invested capital (calculated as a percentage). Often an investor has, as one of their investment criteria, a minimum acceptable rate of return on an acquisition.

RATE OF RETURN ON STOCKHOLDERS’ EQUITY

The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
(Net income) / (Stockholders’ equity)

RATE OF RETURN ON TOTAL ASSETS

The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (Total assets)

Rate of return ratios

Ratios that are designed to measure the profitability of the firm in relation to various
measures of the funds invested in the firm.

Realized return

The return that is actually earned over a given time period.

Reporting period

The time period for which transactions are compiled into a set of financial statements.

Required return

The minimum expected return you would require to be willing to purchase the asset, that is,
to make the investment.

Return

The change in the value of a portfolio over an evaluation period, including any distributions made
from the portfolio during that period.

Return

See yield.

return of capital

the recovery of the original investment (or principal) in a project

Return on assets (ROA)

Indicator of profitability. Determined by dividing net income for the past 12 months
by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net
income/sales) multiplied by asset utilization (sales/assets).

return on assets (ROA)

Although there is no single uniform practice for
calculating this ratio, generally it equals operating profit (before interest
and income tax) for a year divided by the total assets that are used to
generate the profit. ROA is the key ratio to test whether a business is
earning enough on its assets to cover its cost of capital. ROA is used for
determining financial leverage gain (or loss).

return on capital

income; it is equal to the rate of return multiplied by the amount of the investment

Return on capital employed (ROCE)

The operating profit before interest and tax as a percentage of the total shareholders’ funds plus
the long-term debt of the business.

Return on Common Equity Ratio

A measure of the percentage return earned on the value of the
common equity invested in the company. It is calculated by
dividing the net income available for distribution to shareholders
by the book value of the common equity.

Return on equity (ROE)

Indicator of profitability. Determined by dividing net income for the past 12
months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors
use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets
(ROA) multiplied by financial leverage (total assets/total equity).

return on equity (ROE)

This key ratio, expressed as a percent, equals net
income for the year divided by owners’ equity. ROE should be higher than
a business’s interest rate on debt because the owners take more risk.

return on investment

a ratio that relates income generated
by an investment center to the resources (or asset base)
used to produce that income

Return on investment (ROI)

Generally, book income as a proportion of net book value.

RETURN ON INVESTMENT (ROI)

In its most basic form, the rate of return equals net income divided by the amount of money invested. It can be applied to a particular product or piece of equipment, or to a business as a whole.

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