# Rate of return

## Finance term; profit on an investment / From Wikipedia, the free encyclopedia

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In finance, **return** is a profit on an investment.^{[1]} It comprises any change in value of the investment, and/or cash flows (or securities, or other investments) which the investor receives from that investment over a specified time period, such as interest payments, coupons, cash dividends and stock dividends. It may be measured either in absolute terms (e.g., dollars) or as a percentage of the amount invested. The latter is also called the holding period return.

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A loss instead of a profit is described as a *negative return*, assuming the amount invested is greater than zero.

To compare returns over time periods of different lengths on an equal basis, it is useful to convert each return into a return over a period of time of a standard length. The result of the conversion is called the **rate of return**.^{[2]}

Typically, the period of time is a year, in which case the rate of return is also called the **annualized return**, and the conversion process, described below, is called *annualization*.

The return on investment (ROI) is return per dollar invested. It is a measure of investment performance, as opposed to size (c.f. return on equity, return on assets, return on capital employed).