Chapter 6
Return and Risk Appraisal
Abstract
Return is expressed as a fraction, whilst profit is a value expressed in money terms. Accounting and economic profits are different. Risk has no formal definition; risk is a situation-driven concept.
Keywords
return
risk
uncertainty
RoE
MIRR
Greeks
Project
ARR
6.1. Return
The basic goal of a firm is to make a financial return.
Financial return is another term for profit, but accountants and economists have different understandings of what constitutes profit. The return is usually presented as a percentage, whereas profit is given in money terms.
Accounting profit = revenues (sales) less identifiable ...
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