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Average rate of return (ARR) |
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Definition of Average rate of return (ARR)Average rate of return (ARR)The ratio of the average cash inflow to the amount invested.
Related Terms:Abnormal returnsPart of the return that is not due to systematic influences (market wide influences). In Absolute Right of ReturnGoods may be returned to the seller by the purchaser without restrictions. Accelerated cost recovery system (ACRS)Schedule of depreciation rates allowed for tax purposes. Accelerated depreciationAny depreciation method that produces larger deductions for depreciation in the accelerated depreciation(1) The estimated useful life of the fixed asset being depreciated is Accelerated depreciationAny of several methods that recognize an increased amount Accounting rate of return (ARR)A method of investment appraisal that measures 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 Active portfolio strategyA strategy that uses available information and forecasting techniques to seek a Adjustable rate preferred stock (ARPS)Publicly traded issues that may be collateralized by mortgages and MBSs. After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. All equity rateThe discount rate that reflects only the business risks of a project and abstracts from the Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Annual percentage rate (APR)The periodic rate times the number of periods in a year. For example, a 5% annual percentage rate (APR)Interest rate that is annualized using simple interest. annual returnThe 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 holding period returnThe annual rate of return that when compounded t times, would have Annuity in arrearsAn annuity with a first payment on full period hence, rather than immediately. Arithmetic average (mean) rate of returnArithmetic mean return. Arithmetic mean returnAn average of the subperiod returns, calculated by summing the subperiod returns Auction rate preferred stock (ARPS)Floating rate preferred stock, the dividend on which is adjusted every AverageAn arithmetic mean of selected stocks intended to represent the behavior of the market or some Average accounting returnThe average project earnings after taxes and depreciation divided by the average Average (across-day) measuresAn estimation of price that uses the average or representative price of a Average age of accounts receivableThe weighted-average age of all of the firm's outstanding invoices. Average Amortization PeriodThe average useful life of a company's collective amortizable asset base. Average Collection Periodaverage number of days necessary to receive cash for the sale of Average collection period, or days' receivablesThe ratio of accounts receivables to sales, or the total Average-Cost Inventory MethodThe inventory cost-flow assumption that assigns the average Average cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Average inventoryThe beginning inventory for a period, plus the amount at the end of Average lifeAlso referred to as the weighted-average life (WAL). The average number of years that each Average maturityThe average time to maturity of securities held by a mutual fund. Changes in interest rates Average Propensity to ConsumeRatio of consumption to disposable income. See also marginal propensity to consume. Average Propensity to SaveRatio of saving to disposable income. See also marginal propensity to save. Average tax rateTaxes as a fraction of income; total taxes divided by total taxable income. average tax rateTotal taxes owed divided by total income. Barbell strategyA strategy in which the maturities of the securities included in the portfolio are concentrated BARRA's performance analysis (PERFAN)A method developed by BarrA, a consulting firm in Barrier optionsContracts with trigger points that, when crossed, automatically generate buying or selling of Base interest rateRelated: Benchmark interest rate. Basic business strategiesKey strategies a firm intends to pursue in carrying out its business plan. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit CommitteesA committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial book rate of returnAccounting income divided by book value. Book ReturnsBook 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. Break-even payment rateThe prepayment rate of a MBS coupon that will produce the same CFY as that of Break-even tax rateThe tax rate at which a party to a prospective transaction is indifferent between entering Broker loan rateRelated: Call money rate. Bullet strategyA strategy in which a portfolio is constructed so that the maturities of its securities are highly Buy-and-hold strategyA passive investment strategy with no active buying and selling of stocks from the Call money rateAlso called the broker loan rate , the interest rate that banks charge brokers to finance Capitalization RateA discount rate used to find the present value of a series of future cash receipts. Sometimes called discount rate. Carring costsCosts that increase with increases in the level of investment in current assets. CarryRelated:net financing cost. carrying costthe total variable cost of carrying one unit of Carrying costThe cost of holding inventory, which can include insurance, carrying costsCosts of maintaining current assets, including opportunity cost of capital. Carrying valueBook value. 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. Cash and carryPurchase of a security and simultaneous sale of a future, with the balance being financed cash burn rateA relatively recent term that refers to how fast a business Combination strategyA strategy in which a put and with the same strike price and expiration are either both compensation strategya foundation for the compensation plan that addresses the role compensation should play in the organization computer integrated manufacturing (CIM)the integration of two or more flexible manufacturing systems through the use of a host computer and an information networking system confrontation strategyan organizational strategy in which company management decides to confront, rather than avoid, competition; an organizational strategy in which company management still attempts to differentiate company ConglomerateA firm engaged in two or more unrelated businesses. Conglomerate mergerA merger involving two or more firms that are in unrelated businesses. Contribution RateThe percentage tax charged by a state to an employer to Corporate acquisitionThe acquisition of one firm by anther firm. Corporate bondsDebt obligations issued by corporations. Corporate charterA legal document creating a corporation. Corporate financeOne of the three areas of the discipline of finance. It deals with the operation of the firm Corporate financial managementThe application of financial principals within a corporation to create and Corporate financial planningFinancial planning conducted by a firm that encompasses preparation of both Corporate processing floatThe time that elapses between receipt of payment from a customer and the Corporate tax viewThe argument that double (corporate and individual) taxation of equity returns makes Corporate taxable equivalentrate of return required on a par bond to produce the same after-tax yield to Cost company arrangementarrangement whereby the shareholders of a project receive output free of cost leadership strategya plan to achieve the position in a Cost of carryRelated: Net financing cost Coupon rateIn bonds, notes or other fixed income securities, the stated percentage rate of interest, usually Coupon RateThe rate of interest paid on a debt security. Generally stated on an Coupon rateThe nominal interest rate that the issuer promises to pay the coupon rateAnnual interest payment as a percentage of face value. Covered call writing strategyA strategy that involves writing a call option on securities that the investor Covered or hedge option strategiesStrategies that involve a position in an option as well as a position in the Crediting rateThe interest rate offered on an investment type insurance policy. Cross ratesThe exchange rate between two currencies expressed as the ratio of two foreign exchange rates Crossover rateThe return at which two alternative projects have the same net present value. Cumulative abnormal return (CAR)Sum of the differences between the expected return on a stock and the Current rate methodUnder this currency translation method, all foreign currency balance-sheet and income Dedication strategyRefers to multi-period cash flow matching. Detachable warrantA warrant entitles the holder to buy a given number of shares of stock at a stipulated differentiation strategya technique for avoiding competition by distinguishing a product or service from that of competitors through adding sufficient value (including quality and/or features) that customers are willing to pay discount ratethe rate of return on investment that would be required by a prudent investor to invest in an asset with a specific level risk. Also, a rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Discount rateThe interest rate that the Federal Reserve charges a bank to borrow funds when a bank is Discount RateThe rate of interest used to calculate the present value of a stream discount ratethe rate of return used to discount future cash
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