Receivables turnover ratio

Total operating revenues divided by average receivables. Used to measure how effectively a firm is managing its accounts receivable.

Recognition of Revenue

The inclusion of revenue in the profit and loss account. Revenue may be recognized when a contract of sale is made or, alternatively, when the cash has actually been received. It is regarded as bad practice to recognize revenue before either it has been received in cash or its ultimate receipt has become certain enforceable.


Reconciliation is the adjusting of the difference between two items (e.g., balances, amounts, statements, or accounts) so that the figures are in agreement. Often the reasons for the differences must be explained. One example would be reconciling a checking account (bringing the checking ledger and bank balance statement into agreement).


The spreading of risk and division of client premiums among insurance companies allowing the sharing of the burden of a large risk.

Relative purchasing power parity (RPPP)

Idea that the rate of change in the price level of commodities in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries’ currencies.

Replacement cost accounting

An accounting method that includes as part of depreciation the difference between the original purchase price of an asset and the current replacement cost.

Replacement cost insurance

Insurance that pays out the full amount required to replace damaged property with new property, without taking into account the depreciated value of the property.

Replacement cycle

The frequency with which an asset is replaced by an equivalent asset.


A document that records a decision or action by a board of directors, or a bond resolution by a government entity authorizing a bond issue.

Resource Estimate

An estimate of the resources (by department, if appropriate) required to implement a particular initiative.

Retained earnings

Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends.

Return of Capital

Return of Capital is the distribution of cash that resulted from tax savings on depreciation, sale of a capital asset or securities, or any other sources unrelated to retained earnings.

Return on Assets (ROA)

Return On Assets (ROA) shows the after tax earnings of assets. Return on assets is an indicator of how profitable a company is. Use this ratio annually to compare a business’ performance to the industry norms: The higher the ratio the greater the return on assets. However this has to be balanced against such factors as risk, sustainability and reinvestment in the business through development costs.

Return On Capital Employed (ROCE)

Return On Capital Employed (ROCE) is a measure of how effectively the company is using its capital. The formula to measures the return on all the assets the company is using: Profit before interest and tax (PBIT) / (total assets – current liabilities)

Return On Equity (ROE)

Return On Equity (ROE) measures the overall efficiency of the firm in managing its total investments in assets and in generating a return to stockholders. It is the primary measure of how well management is running the company. ROE allows you to quickly gauge whether a company is a value creator or a cash consumer. By relating the earnings generated to the shareholders’ equity, you can see how much cash is created from the existing assets. Clearly, all things being equal, the higher a company’s ROE, the better the company.

Return On Invested Capital (ROIC)

Return On Invested Capital (ROIC) is a measure of how effectively a company uses the money (owned or borrowed) invested in its company operations. It is calculated by: net income after taxes / (total assets less excess cash minus non-interest-bearing liabilities).

Return On Investment (ROI)

Return On Investment (ROI) is a profitability measure that evaluates the performance of a business. ROI can be calculated in various ways. The most common method is Net Income as a percentage of Net Book Value (total assets minus intangible assets and liabilities).

Return on sales

A measurement of operational efficiency equaling net pre-tax profits divided by net sales expressed as a percentage.

Return on total assets

The ratio of earnings available to common stockholders to total assets.

Revolving line of credit

A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years.

Reward-to-volatility ratio

Ratio of excess return to portfolio standard deviation.

Rights offering

Issuance to shareholders that allows them to purchase additional shares, usually at a discount to market price. Holdings of shareholders who do not exercise rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed-end funds, which cannot otherwise issue additional common stock.

Risk factor

In arbitrage pricing theory or the multibeta capital asset pricing model, the set of common factors that impact returns, e.g., market return, interest rates, inflation, or industrial production.

Risk management

The process of assessing and mitigating risks, and the preparation of alternative courses of action to achieve a set target.


Measures that provide a way of quantifying the chances of success of achieving an associated goal.

Round-trip transactions costs

Costs of completing a transaction, including commissions, market impact costs, and taxes.


Payment for the right to use intellectual property or natural resources.