Rate of Return on Investment. The value of the outcomes

Rate of Return on Investment
Name
Institutional Affiliate
Rate of Return on Investment
Investing in a given business proposition or project builds around the need to benefit from the same through a profitable outcome. The additional value gained from making financial commitment or investment to a project may take various forms, including capital gains and income accrued as profits from the initial investment. The value of the outcomes realized from such investments is further guided by the magnitude of the project’s uncertainty to produce the desired profit. In essence, making a financial decision on whether or not to invest in a particular project is guided by the perceived benefits generated by the said investment. The perceived benefits or outcomes of an investment refer to what is commonly known as returns. It is important, however, to take note of the fact that the perceived returns have a varied probability of occurrence, which determines whether or not the benefits are satisfactory to the investors or business entities. It is the varied probability characterizing the returns on investment that bring in the concept of risk in business operations or investments for that matter. Risk can thus be defined as the degree or extent of uncertainty characterizing a business investment and thus playing a significant role in determining the return on investment. Long-term investments, for instance, create an expectation of returns from the same upon the maturity of the period or time interval of receiving the returns from such investments. The returns gained from the investmen...