The term net yield (synonym profitability, profit rate, yield rate, capital return, return ratio, interest charges set - English return, guesses/advises OF return or to Return on Investment (RoI)) is a technical term of the financial markets. The net yield indicates the relationship of the incomes to the expenditures and in per cent and annually is usually indicated. The most well-known net yield characteristic number is the interest rate.

The term is however not sharply defined - it exists a whole set of different net yield terms for different applications.

Fundamental

Basic formula

With the net yield entire-follow an investment as actual interest charges of the assigned capital measured. In the basic formula of the net yield thereby the amount of repayment is set into relation to the assigned capital:

\ mathrm {net yield} = \ frac {\ mathrm {amount of repayment}} {\ mathrm {assigned capital}} - 1

If one uses for example 5 "€ and gains 10 "€, the assigned capital was doubled. The net yield is then with 100%.

\ mathrm {net yield} = \ frac {\ mathrm {10}} {\ mathrm {5}} - 1= 100%

The net yield is indicated either as percentage (1.7%) or as numerical value (decimal fraction, 0.017).

Annualisierung

In order to make the net yields of different plant forms comparable with differently long plant periods, they are usually annualisiert, i.e. referred to the period of a yearly.

Net yield and risk

Crucially with the comparison of several plant alternatives is however also the risk accompanying with the respective plant form. In order to make net yield of differently risky plants comparable with one another, they are risk-set (risk-adapted). A well-known measure of the risk clearing is the Sharpe measure ("“Sharpe reason"”).

Kinds of net yields

Net yield term with investments

The net yield of an investment is the relationship of the profit of the investment to the originally invested amount:

\ mathrm {net yield} = \ frac {\ mathrm {profit}} {\ mathrm {investment}}

The term -1 is void here, since the profit of the investment from the amount of repayment mentioned above differs exactly around the invested amount.

Another example of the application of the net yield is the interest charges of the investment of an enterprise into new production plants.

Dividend yield

The dividend yield is the gross amount of the dividend in per cent of the current share quotation. In this way investors can derive, as high the yield is, which their shares throw off:

\ mathrm {net yield} = \ frac {\ mathrm {dividend payment}} {\ mathrm {current share quotation}} - 1

See also: Rotating net yield.

Net yield of an investment of funds

The net yield is used as comparison of different investments of funds. Background is that different plant forms contain often different yield and cost components. Thus here the net yield gives the answer to the question, which interest rate per year would be necessary, in order to come to the same plant result. Often one speaks also of net yield after (coming in) tax, in order to compare plants with one another with different tax treatment.

ERR (Internal rate OF Return)

Those ERR is equivalent to the internal interest rate.

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