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What is Return?

A return, often known as a financial return, is basically the amount of money gained or lost on investment across a certain duration. Managers can assess and evaluate how well their investments are progressing by calculating a return as a percentage of the initial investment.

Deeper definition

The variation in the dollar worth of an investment over time is what is referred to as a return. A percentage determined from the proportion of the financial gain may also be used to calculate a return. Returns can be provided as overall results (after charges, levies, and inflation) or as gross returns (nothing but the price change). 

Prudent investors understand that a precise definition of return is contextual and is based on the financial facts used to calculate it. Profit is an umbrella phrase that can refer to gross, operational, total, before tax, or after-tax. Investment is an umbrella phrase that can refer to specific, aggregate, or total assets.

The majority of people automatically think of equities and bonds when they hear the word investing. They can be considered investments, but the basic definition of an investment is something into which you invest cash and anticipate a return. Technology, real estate, inventions, procedures, trademarks, and machinery are all investments that companies make. Businesses think all of them to be investments since they put money into them and hope to profit from them.

Return ratios are a type of financial metric that assesses the efficiency with which investment is conducted. Types of return ratios are “Return on Investment (ROI)”, Return on Asset (ROA)” and Return on Equity (ROE)”. The ROA ratio, for instance, is computed by dividing revenue from real investments by newly invested funds. As a proportion of the assets, this reflects the profit or return on the investments.

Return Example

If Netflix paid $5.2 million for a TV series and spent $650,000 on marketing the films across numerous channels. If Netflix made a total of $10.6 million from the sale of the movie over the course of a year, the return is $4.75 million, implying a profit for the company.

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