Financial Glossary


R

Ratchet Provisions. See Antidilution Provisions and Full Ratchet Antidilution provisions.

Rate of Return. The total proceeds derived from the investment per dollar initially invested. Proceeds must be defined broadly to include both cash distributions and capital gains. The rate of return is expressed as a percentage.

Ratio Withdrawal Plan. A type of mutual fund withdrawal plan that provides investors with an income based on a percentage of the value of units held.

Real Estate Investment Trust (REIT). A closed-end investment company that specializes in real estate or mortgage investments.

Real Interest Rate. The rate of interest on a loan or investment, excluding the effects of inflation. For example, with a nominal interest rate of seven per cent on a loan with inflation at two per cent, the real interest rate is five per cent (seven minus two). Lenders take into account the anticipated inflation rate in deciding what the nominal rate should be in order to obtain an acceptable expected real return. The real return, however, is uncertain because future inflation is uncertain. All things being equal, the higher the current inflation rate, the higher nominal interest rates will be. However, inflation is only one of a number of factors affecting interest rates. The credit worthiness of the borrower and the perceived risk of the investment are other major factors.

Real Rate Of Return. The stated rate of return less both the inflation rate tax considerations and the risk premium.

Realized and Unrealized Gains. A gain is realized when an investment is sold for more than the purchase price. An investment that has increased in value, but has not yet been sold, has an "unrealized" gain.

Recapitalization. This is a financing technique used by companies to defend against hostile takeovers. By recapitalization, a company restructures it's debt and equity mixture without affecting the total amount of balance sheet equity.

Recast Financial Statements. Proforma Financial Statements or reconstructed past and current financial statements of a business to adjust for specified changes. Financial statements of companies offered for sale are often recast to take out excessive owners