Annual Basis

AAA

DEFINITION of 'Annual Basis'

The return earned by an investment over the course of a year. Projections containing the phrase "on an annual basis" have usually used less than a year's worth of data to project a full year's worth of returns. For example, an investment might have returned 1.5% in one month. By multiplying this return by 12, an 18% annual basis is the result. The shorter the period of data used to determine an annual return, the less accurate that projection is likely to be. Statements about what an investment will return on an annual basis are always estimates.

INVESTOPEDIA EXPLAINS 'Annual Basis'

Annual basis can also refer to the cost of something over the course of a year. For example, if Angela wanted to establish a household budget for the year and it was April 1, she could look at how much money her family had spent on groceries in January, February and March to estimate what her family's grocery costs would be on an annual basis. She sees that she spent $300 in January, $250 in February and $350 in March, for a total of $900. Since 25% of the year has passed, she multiplies $900 x 4 to determine that groceries should cost her family around $3,600 on an annual basis.

RELATED TERMS
  1. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
  2. Annualized Total Return

    The average amount of money earned by an investment each year ...
  3. Basis

    1. The variation between the spot price of a deliverable commodity ...
  4. Annual Turnover

    The percentage rate at which a mutual fund or exchange-traded ...
  5. Annualized Rate

    A rate of return for a given period that is less than one year, ...
  6. Semiannual

    A semiannual event happens twice a year, typically every six ...
RELATED FAQS
  1. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  2. What constitutes a secondary market?

    A secondary market covers the trading of any good, commodity, security or asset after it has been issued or created. Although ... Read Full Answer >>
  3. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  4. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>
  5. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  6. What are the differences between global depositary receipts (GDRs) and American depositary ...

    A global depositary receipt (GDR) is a bank certificate issued in multiple countries for shares in a foreign company. The ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    How To Calculate Your Investment Return

    How much are your investments actually returning? Find out why the method of calculation matters.
  2. Investing

    Measure Your Portfolio's Performance

    Learn three ratios that will help you evaluate your investment returns.
  3. Fundamental Analysis

    Gauge Portfolio Performance By Measuring Returns

    Calculate returns frequently and accurately to ensure that you're meeting your investing goals.
  4. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  5. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  6. Professionals

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  7. Fundamental Analysis

    Calculating the Net Debt to EBITDA Ratio

    Financial analysts typically use the net debt to EBITDA ratio to determine a company’s ability to pay its debt.
  8. Economics

    How Does an Operating Lease Work?

    Operating lease is a term used mostly in accounting to denote a lease that gives the lessee rights to use and operate an asset without ownership.
  9. Economics

    Do Transport Stocks Signal a U.S. Selloff?

    The Dow Jones Transportation Average index has underperformed the broader DJ Industrials Average, leading some market watchers to speculate a selloff.
  10. Economics

    Understanding Historical Cost

    Historical cost equals the original purchase price of an asset recorded on a company’s balance sheet.

You May Also Like

Hot Definitions
  1. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  2. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  3. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  4. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  5. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
  6. Himalayan Option

    An exotic equity option belonging to a class known as mountain range options. Himalayan options are based on a basket of ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!