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Rate of return
A way to measure economic success, albeit one that can be manipulated quite easily. It is calculated by expressing the economic gain (usually profit) as a percentage of the capital used to produce it. Deciding what number to use for profit is rarely simple. Likewise, totaling up how much capital was used can be tricky, especially if it is expanded to include intangible assets and human capital. When firms are evaluating a project to decide whether to go ahead with it, they estimate the project's expected rate of return and compare it with their cost of capital. (See net present value and discount rate. )
- Part of Speech: noun
- Synonym(s):
- Blossary:
- Industry/Domain: Economy
- Category: Economics
- Company: The Economist
- Product:
- Acronym-Abbreviation:
Other Languages:
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