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Expected return on investment |
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Definition of Expected return on investmentExpected return on investmentThe return one can expect to earn on an investment. See: capital asset
Related Terms: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. Abnormal returnsPart of the return that is not due to systematic influences (market wide influences). In After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. Annualized holding period returnThe annual rate of return that when compounded t times, would have Arithmetic average (mean) rate of returnArithmetic mean return. Arithmetic mean returnAn average of the subperiod returns, calculated by summing the subperiod returns Average accounting returnThe average project earnings after taxes and depreciation divided by the average Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. Cumulative abnormal return (CAR)Sum of the differences between the expected return on a stock and the Dividend reinvestment plan (DRP)Automatic reinvestment of shareholder dividends in more shares of a Dollar returnThe return realized on a portfolio for any evaluation period, including (1) the change in market Dollar-weighted rate of returnAlso called the internal rate of return, the interest rate that will make the Ex post returnRelated: Holding period return Exante returnThe expected return of a portfolio based on the expected returns of its component assets and Excess return on the market portfolioThe difference between the return on the market portfolio and the Excess returnsAlso called abnormal returns, returns in excess of those required by some asset pricing model. Expected future cash flowsProjected future cash flows associated with an asset of decision. Expected future returnThe return that is expected to be earned on an asset in the future. Also called the Expected returnThe return expected on a risky asset based on a probability distribution for the possible rates Expected return-beta relationshipImplication of the CAPM that security risk premiums will be Expected valueThe weighted average of a probability distribution. Expected value of perfect informationThe expected value if the future uncertain outcomes could be known Foreign direct investment (FDI)The acquisition abroad of physical assets such as plant and equipment, with Future investment opportunitiesThe options to identify additional, more valuable investment opportunities Geometric mean returnAlso called the time weighted rate of return, a measure of the compounded rate of Guaranteed investment contract (GIC)A pure investment product in which a life company agrees, for a Holding period returnThe rate of return over a given period. Horizon returnTotal return over a given horizon. Incremental internal rate of returnIRR on the incremental investment from choosing a large project Internal rate of returnDollar-weighted rate of return. Discount rate at which net present value (NPV) Investment analystsRelated: financial analysts Investment bankFinancial intermediaries who perform a variety of services, including aiding in the sale of Investment decisionsDecisions concerning the asset side of a firm's balance sheet, such as the decision to Investment grade bondsA bond that is assigned a rating in the top four categories by commercial credit Investment incomeThe revenue from a portfolio of invested assets. Investment managerAlso called a portfolio manager and money manager, the individual who manages a Investment product line (IPML)The line of required returns for investment projects as a function of beta Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Investment trustA closed-end fund regulated by the investment Company Act of 1940. These funds have a Investment valueRelated:straight value. InvestmentsAs a discipline, the study of financial securities, such as stocks and bonds, from the investor's Legal investmentsinvestments that a regulated entity is permitted to make under the rules and regulations Leveraged required returnThe required return on an investment when the investment is financed partially by debt. Market returnThe return on the market portfolio. Money rate of returnAnnual money return as a percentage of asset value. Multiple rates of returnMore than one rate of return from the same project that make the net present value Mutually exclusive investment decisionsinvestment decisions in which the acceptance of a project Net investmentGross, or total, investment minus depreciation. Net present value of future investmentsThe present value of the total sum of NPVs expected to result from Passive investment strategySee: passive management. Passive investment managementBuying a well-diversified portfolio to represent a broad-based market Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the Rate of return ratiosRatios that are designed to measure the profitability of the firm in relation to various Realized returnThe return that is actually earned over a given time period. Reinvestment rateThe rate at which an investor assumes interest payments made on a debt security can be Reinvestment riskThe risk that proceeds received in the future will have to be reinvested at a lower potential REIT (real estate investment trust)Real estate investment trust, which is similar to a closed-end mutual REMIC (real estate mortgage investment conduit)A pass-through tax entity that can hold mortgages Required returnThe minimum expected return you would require to be willing to purchase the asset, that is, ReturnThe change in the value of a portfolio over an evaluation period, including any distributions made Return on assets (ROA)Indicator of profitability. Determined by dividing net income for the past 12 months Return on equity (ROE)Indicator of profitability. Determined by dividing net income for the past 12 Return on investment (ROI)Generally, book income as a proportion of net book value. Return on total assetsThe ratio of earnings available to common stockholders to total assets. Return-to-maturity expectationsA variant of pure expectations theory which suggests that the return that an Riskless rate of returnThe rate earned on a riskless asset. Safety-net returnThe minimum available return that will trigger an immunization strategy in a contingent Short-term investment servicesServices that assist firms in making short-term investments. Subperiod returnThe return of a portfolio over a shorter period of time than the evaluation period. T-period holding-period returnThe percentage return over the T-year period an investment lasts. Time-weighted rate of returnRelated: Geometric mean return. Total dollar returnThe dollar return on a nondollar investment, which includes the sum of any Total returnIn performance measurement, the actual rate of return realized over some evaluation period. In Underinvestment problemThe mirror image of the asset substitution problem, wherein stockholders refuse Unit investment trustMoney invested in a portfolio whose composition is fixed for the life of the fund. Unleveraged required returnThe required return on an investment when the investment is financed entirely Zero-investment portfolioA portfolio of zero net value established by buying and shorting component RATE OF RETURN ON STOCKHOLDERSâ€™ EQUITYThe percentage return or profit that management made on each dollar stockholders invested in a company. Hereâ€™s how you figure it: RATE OF RETURN ON TOTAL ASSETSThe percentage return or profit that management made on each dollar of assets. The formula is: 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. Accounting rate of return (ARR)A method of investment appraisal that measures 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 Investment centreA division or unit of an organization that is responsible for achieving an adequate return on Return on capital employed (ROCE)The operating profit before interest and tax as a percentage of the total shareholdersâ€™ funds plus Return on investment (ROI)The net profit after tax as a percentage of the shareholdersâ€™ investment in the business. Target rate of return pricingA method of pricing that estimates the desired return on investment to be achieved from the Purchase returnsA contra account that reduces purchases by the amount of items purchased that were subsequently returned. Sales returnsA contra account that offsets revenue. It represents the amount of sales made that were later returned. capital investment analysisRefers to various techniques and procedures internal rate of return (IRR)The precise discount rate that makes the return on assets (ROA)Although there is no single uniform practice for return on equity (ROE)This key ratio, expressed as a percent, equals net return on investment (ROI)A very general concept that refers to some return on salesThis ratio equals net income divided by sales revenue. Expected ValueThe value of the possible outcomes of a variable weighted by the Internal Rate of Return (IRR)The discount rate that equates the present value of the net cash InvestmentThe commitment of funds (capital) in anticipation of an increased Return on Common Equity RatioA measure of the percentage return earned on the value of the Return on Total Assets RatioA measure of the percentage return earned on the value of the
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