Capacity and Rate of return: Difference between pages

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(Expand the page for different annual bases of quoting rates.)
 
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1. ''Law''.  
The investor's return on an investment, expressed as a proportion of the amount invested.


If a company or individual lacking contractual capacity purports to enter a contract, the contract may not be enforceable.  
Most commonly expressed as a percentage.


Problems of contractual capacity may arise, for example, in relation to requirements for dual signatories to bind certain companies or to bind companies of particular kinds in certain [[jurisdiction]]s.


Other potential capacity problems - relating more to individuals - include minors, mental incapacity or intoxication.
<span style="color:#4B0082">'''Example'''</span>


GBP 1 million is invested.


2. ''Banking''.  
GBP 1.03 million is repayable at the end of the period.  


In relation to the individuals whom a bank will authorise to open and operate a bank account, the appropriate level of seniority and the role of the individuals within the business of the customer.


The rate of return per period (r) is:


3. ''Regulation.''
r = (End amount / Start amount) - 1


An authorisation or entitlement to undertake a role, under a regulatory regime.


''Which can also be expressed as:''


4. ''Tax and borrowings.''
r = (End / Start) - 1


More generally, the ability to absorb or hold. 
''or''


For example, tax capacity or borrowing capacity.
r = <math>\frac{End}{Start}</math> - 1


(Tax capacity being the ability to use tax reliefs efficiently to shelter otherwise taxable profits or gains. Borrowing capacity being the maximum amount of borrowing which can be sustained by a business, based on its expected future cashflows and its assets.)


= <math>\frac{1.03}{1}</math> - 1


5. ''Project management.''
= 0.0300


The amount and nature of responsibilities that an organisation, department or individual is able to deal with successfully.
= '''3.00%''' per period




6. ''Systems and processes.''
=== Basis of quoting rates of return ===


The maximum physical or data flow that a system can manage successfully.
The rate of return in the example above has been calculated and stated on a periodic basis.
 
Rates of return are often also quoted on an annual basis, following the conventional quoting convention for the market in which the proposed deal is being quoted.




== See also ==
== See also ==
* [[Authority]]
* [[Conventional year]]
* [[Bandwidth]]
* [[Effective annual rate]]
* [[CB&E]]
* [[Nominal annual rate]]
* [[Contract]]
* [[Periodic]]
* [[Dual capacity]]
* [[Periodic rate]]
* [[Intra vires]]
* [[Real return]]
* [[Jurisdiction]]
* [[Return]]
* [[Loss absorbing capacity]] (LAC)
* [[Yield]]
* [[Minor]]
* [[Primary Loss Absorbing Capacity]]  (PLAC)
* [[Regulation]]
* [[Risk capacity]]
* [[Shelter]]
* [[Single capacity]]
* [[Tax]]
* [[Tax capacity]]
* [[Tax relief]]
* [[Total Loss Absorbing Capacity]]  (TLAC)


[[Category:Self_management_and_accountability]]
[[Category:Corporate_finance]]
[[Category:Planning_and_projects]]
[[Category:Long_term_funding]]
[[Category:Compliance_and_audit]]

Revision as of 17:01, 19 November 2015

The investor's return on an investment, expressed as a proportion of the amount invested.

Most commonly expressed as a percentage.


Example

GBP 1 million is invested.

GBP 1.03 million is repayable at the end of the period.


The rate of return per period (r) is:

r = (End amount / Start amount) - 1


Which can also be expressed as:

r = (End / Start) - 1

or

r = <math>\frac{End}{Start}</math> - 1


= <math>\frac{1.03}{1}</math> - 1

= 0.0300

= 3.00% per period


Basis of quoting rates of return

The rate of return in the example above has been calculated and stated on a periodic basis.

Rates of return are often also quoted on an annual basis, following the conventional quoting convention for the market in which the proposed deal is being quoted.


See also

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