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.

BREAKING DOWN '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.

RELATED TERMS
  1. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders ...
  2. Negative Growth

    A contraction in a country's economy, as evidenced by a decrease ...
  3. Return On Assets - ROA

    An indicator of how profitable a company is relative to its total ...
  4. Economic Profit (Or Loss)

    The difference between the revenue received from the sale of ...
  5. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  6. Nonrenewable Resource

    A resource of economic value that cannot be readily replaced ...
Related Articles
  1. Options & Futures

    Basic Investment Objectives

    You might know about different asset types, but do you know how each type contributes to a particular goal?
  2. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  3. Investing Basics

    Overcoming Compounding's Dark Side

    Understanding how money is made and lost over time can help you improve your returns.
  4. Investing Basics

    Looking Deeper Into Capital Allocation

    Discover how companies decide how to spend their cash in a variety of market conditions.
  5. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  6. Budgeting

    Use ROA To Gauge A Company's Profits

    Do you rely too heavily on ROE? Consider using return on assets for a more complete picture.
  7. Options & Futures

    Warrants: A High-Return Investment Tool

    Discover the advantages of this largely unexploited investment vehicle.
  8. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
  9. Term

    The History and Purpose of TQM

    Total quality management explores processes to enhance quality and productivity.
  10. Term

    Understanding Market Price and Its Changes

    An asset’s or service’s market price is the current price at which it can be bought and sold.
RELATED FAQS
  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center