Financial Terms | |
return on capital |
Information about financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.
Main Page: money, inventory, investment, accounting, financial advisor, tax advisor, credit, payroll, |
Definition of return on capitalreturn on capitalincome; it is equal to the rate of return multiplied by the amount of the investment
Related Terms:Return on capital employed (ROCE)The operating profit before interest and tax as a percentage of the total shareholders’ funds plus return of capitalthe recovery of the original investment (or principal) in a project capital recoveryRefers to recouping, or regaining, invested capital over 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 cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. CapitalMoney invested in a firm. Capital accountNet result of public and private international investment and lending activities. Capital allocationdecision Allocation of invested funds between risk-free assets versus the risky portfolio. Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital budgetA firm's set of planned capital expenditures. Capital budgetingThe process of choosing the firm's long-term capital assets. Capital expendituresAmount used during a particular period to acquire or improve long-term assets such as Capital flightThe transfer of capital abroad in response to fears of political risk. Capital gainWhen a stock is sold for a profit, it's the difference between the net sales price of securities and Capital gains yieldThe price change portion of a stock's return. Capital leaseA lease obligation that has to be capitalized on the balance sheet. Capital lossThe difference between the net cost of a security and the net sale price, if that security is sold at a loss. Capital marketThe market for trading long-term debt instruments (those that mature in more than one year). Capital market efficiencyReflects the relative amount of wealth wasted in making transactions. An efficient Capital market imperfections viewThe view that issuing debt is generally valuable but that the firm's Capital market line (CML)The line defined by every combination of the risk-free asset and the market portfolio. Capital rationingPlacing one or more limits on the amount of new investment undertaken by a firm, either Capital structureThe makeup of the liabilities and stockholders' equity side of the balance sheet, especially Capital surplusAmounts of directly contributed equity capital in excess of the par value. CapitalizationThe debt and/or equity mix that fund a firm's assets. Capitalization methodA method of constructing a replicating portfolio in which the manager purchases a Capitalization ratiosAlso called financial leverage ratios, these ratios compare debt to total capitalization Capitalization tableA table showing the capitalization of a firm, which typically includes the amount of CapitalizedRecorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures Capitalized interestInterest that is not immediately expensed, but rather is considered as an asset and is then Complete capital marketA market in which there is a distinct marketable security for each and every Cost of capitalThe required return for a capital budgeting project. Cost of limited partner capitalThe discount rate that equates the after-tax inflows with outflows for capital Cumulative abnormal return (CAR)Sum of the differences between the expected return on a stock and the Dedicated capitalTotal par value (number of shares issued, multiplied by the par value of each share). Also 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 Efficient capital marketA market in which new information is very quickly reflected accurately in share 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 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 on investmentThe return one can expect to earn on an investment. See: capital asset Expected return-beta relationshipImplication of the CAPM that security risk premiums will be Geometric mean returnAlso called the time weighted rate of return, a measure of the compounded rate of Hard capital rationingcapital rationing that under no circumstances can be violated. Holding period returnThe rate of return over a given period. Horizon returnTotal return over a given horizon. Human capitalThe unique capabilities and expertise of individuals. 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) Issued share capitalTotal amount of shares that are in issue. Related: outstanding shares. Legal capitalValue at which a company's shares are recorded in its books. Leveraged required returnThe required return on an investment when the investment is financed partially by debt. Long-term debt/capitalizationIndicator of financial leverage. Shows long-term debt as a proportion of the Market capitalizationThe total dollar value of all outstanding shares. Computed as shares times current Market capitalization rateExpected return on a security. The market-consensus estimate of the appropriate 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 Net working capitalCurrent assets minus current liabilities. Often simply referred to as working capital. Nondiversifiability of human capitalThe difficulty of diversifying one's human capital (the unique Opportunity cost of capitalExpected return that is foregone by investing in a project rather than in Other capitalIn the balance of payments, other capital is a residual category that groups all the capital Outstanding share capitalIssued share capital less the par value of shares that are held in the company's treasury. Pecking-order view (of capital structure)The argument that external financing transaction costs, especially Perfect capital marketA market in which there are never any arbitrage opportunities. Perfect market view (of capital structure)Analysis of a firm's capital structure decision, which shows the Personal tax view (of capital structure)The argument that the difference in personal tax rates between Pie model of capital structureA model of the debt/equity ratio of the firms, graphically depicted in slices of Planned capital expenditure programcapital expenditure program as outlined in the corporate financial plan. Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the Pro forma capital structure analysisA method of analyzing the impact of alternative capital structure Rate of return ratiosRatios that are designed to measure the profitability of the firm in relation to various Real capitalWealth that can be represented in financial terms, such as savings account balances, financial Realized returnThe return that is actually earned over a given time period. 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 "Soft" Capital Rationingcapital rationing that under certain circumstances can be violated or even viewed Static theory of capital structureTheory that the firm's capital structure is determined by a trade-off of the 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.
Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |