Explanation:An annual return is a document that contains details of a company’s share capital, indebtedness, directors, shareholders, changes in dictatorships, corporate governance disclosures etc. The regulations of the Companies Act, 2013 specify that every company must prepare and file annual returns with the registrar each financial year before the 29th of November. In this article, we look at the information filed by the company in its annual return in detail. If the annual return is expressed as the annual percentage rate, then the annual rate will usually not take into account the effect of compounding interest. But, if the annual return is expressed as annual percentage yield, then the number takes into account the effects of compounding interest. Formula : Annual Return = (Ending Value / Initial Value) (1 / No. of Years) – 1
In a nutshell:
- The annual return is the return that an investment provides over a period of time, expressed as a time-weighted annual percentage.
- The annualized return is calculated as a geometric average to show what the annual return compounded would look like.
- An annual return can be more useful than a simple return when you want to see how an investment has performed over time, or to compare two investments.
- An annual return can be determined for a variety of assets, including stocks, bonds, mutual funds, ETFs, commodities, and certain derivatives