Advanced English Dialogue for Business – Annualreturn total return

Listen to a Business English Dialogue about Annualreturn total return

Howard: Hi Ashley, have you ever heard of the term “annual return total return”?

Ashley: No, what does it mean?

Howard: Annual return, or total return, measures the percentage change in an investment’s value over a specific period, typically one year, including both capital appreciation and dividends or interest earned.

Ashley: Oh, so it’s a way to gauge how much an investment has grown or shrunk over a year?

Howard: Exactly. It gives investors a comprehensive view of their investment performance, accounting for both price changes and income generated.

Ashley: That sounds important. So, how is annual return total return calculated?

Howard: It’s calculated by dividing the ending value of the investment by its initial value, then subtracting one and expressing the result as a percentage.

Ashley: I see. So, investors can use annual return total return to compare the performance of different investments?

Howard: Yes, exactly. It allows investors to assess the relative performance of investments and make informed decisions about where to allocate their capital.

Ashley: That makes sense. Are there any limitations to using annual return total return?

Howard: One limitation is that it doesn’t account for the timing of cash flows, so it may not fully capture the impact of buying or selling at different points in time.

Ashley: I understand. So, investors should consider other factors alongside annual return total return when evaluating investments?

Howard: Absolutely. It’s important to consider factors like risk, liquidity, and the investment’s suitability for one’s overall financial goals.

Ashley: Thanks for explaining, Howard. Annual return total return seems like a useful tool for assessing investment performance.

Howard: No problem, Ashley. It’s a fundamental concept in investment analysis and can help investors make more informed decisions.