Friday 8th December 2000 |
Text too small? |
Below is a simple example of how the SROR would be calculated for a $1000 investment over a one-year period:
Original investment | $1000 |
+ Dividends received | $40 |
+ Imputation credits | $10 |
+ Price appreciation | $50 |
= End value of investment | $1100 |
SROR: | |
= change in value ÷ original value | |
= (1,100 - 1,000) ÷ 1,000 | 10% |
In general terms, higher rates of return indicate better performance. But, consideration must also be given to the risk profile of companies when comparing their relative performance. Naturally, investors expect a higher rate of return from companies with higher levels of risk. For example, they will have different expectations for returns from a start-up software company compared to a long-standing producer of staple food products.
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