The return describes the overall success of an investment within one accounting period. It therefore indicates the ratio of the payout to the deposits made by this system. The return is therefore important for measuring the success of an investment
The aim of every financial or capital investment is to achieve a certain amount with the invested capital. This is commonly referred to as the rate of return. The rate of return, also known as profitability, can be viewed in terms of payment or balance sheet:
Payment-oriented consideration: In the case of the total return on capital from the payment-oriented perspective, the company’s surplus payments are in relation to the total capital employed. If you want to find out the return on equity, you have to deduct the interest payments to the lenders from the company’s surplus.
Balance sheet-oriented view: The profit for the period is set in relation to the company’s total available capital (equity and debt).
In the area of capital investments there are four types of income: interest, dividends, price gains and currency gains.
Extended term of return:
The rate of return is predominantly used in the case of capital investments. However, there is also the possibility of viewing the return in general as a means of measuring the success of a direct investment. Participation does not have to take the form of capital, but can also take the form of real estate, own work or raw materials.