Return

From WilmottWiki

The notion of return in finance is a very fundamental one, and is generally defined as the percentage growth of some asset including any earnings or any dividends:

Note that this measure can be negative if the value of the asset falls. The time period over which the change is measured is generally one day, but could easily be measured in shorter or longer periods. Returns are often assumed to be normally distributed, but frequently they exhibit taller central peaks and fatter tails.

Applied to corporations, return is known as ROA or Return On Assets and is defined as the corporation's net earnings divided by the total book value of its assets. This measure is also called the ROI, the Return On Investment.

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References:

Paul Wilmott Introduces Quantitative Finance, Ch. 6, Paul Wilmott, Wiley, 2005.

Dictionary of Financial Engineering, John F Marshall, Wiley, 2000.

--DCH 15:22, 10 November 2006 (GMT)