Information about Return (finance)

Returns, in economics and political economy, are the distributions or payments awarded to the various suppliers of the factors of production. In classical economics the factors of production are labour, land, and capital.

Wages

Wages are the return to labour. The return to an individual's involvement (mental or physical) in the creation of goods or services. As we own our bodies and our minds wages are payments to the individual suppliers of labour even if the supplier is the self.

Rent

In classical economics (which assumed that land was "owned" by a noble) rent was the return to an "owner" of land. In later economic theory this term is more refined as economic rent which includes returns to other political contrivances as well. Some economists considered rent as unearned and always based on political contrivance.

Profit

In Classical Economics profit is the return to the owner(s) of capital stocks (machinery, tools, structures). Unlike labor, capital can be owned in shares and profit need not be individualized (though it often is). What is called "dividends" in current financial parlance would be considered as profits by classical economists and so too would "capital gains". The classical economists referred to a fee paid for the use of money as "interest" but did not consider such interest a factor of production. Smith seems to assert that "interest" is paid from profits. Ricardo does likewise.

In Neoclassical economics profit is total investment performance and includes economic rent.

Total investment return

The total investment return, also called investment performance, includes direct incomes (dividends, interests...) and capital gains (less capital losses) due to changes in the asset market value.

See also

In economics, capital or capital goods or real capital refers to already-produced durable goods available for use as a factor of production. Steam shovels (equipment) and office buildings (structures) are examples.
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The investment performance is the total return of an investment (either a given asset or a portfolio of assets) during a given period (one year for example).

It takes into account:
  • the direct income for the investor (interests, dividends...

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Economic rent
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The investment performance is the total return of an investment (either a given asset or a portfolio of assets) during a given period (one year for example).

It takes into account:
  • the direct income for the investor (interests, dividends...

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In finance, rate of return (ROR) or return on investment (ROI), or sometimes just return, is the ratio of money gained or lost on an investment relative to the amount of money invested.
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The internal rate of return (IRR) is a capital budgeting method used by firms to decide whether they should make long-term investments.

The IRR is the annualized effective compounded return rate which can be earned on the invested capital, i.e. the yield on the investment.
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