Negative Return

Definition of 'Negative Return'


This occurs when a company or business has a financial loss or lackluster returns on an investment during a specific period of time. Some businesses report a negative return during their early years because of the amount of capital that initially goes into the business to get it off the ground. New businesses generally do not begin making a profit until after a few years of being established.

Also referred to as negative return on equity.

Investopedia explains 'Negative Return'


A new business that has invested $500,000 into equipment, tools, repairs or any other operational expenses and is losing $50,000 annually will have negative return on capital of 10%. If the company is able to realize a return on equity in the near future, then the impact of this initial negative return can be overcome.

Investors in the company will be willing to stick around if they know that the company has the potential to quickly turn its negative return into a positive return and bring in high profits, sales or asset turnover.

Stocks and other investments can also have a negative return.



comments powered by Disqus
Hot Definitions
  1. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  2. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  3. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  4. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  5. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  6. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
Trading Center