From ROI to Actual Returns: Understanding the Truth Behind Economic Rent Yield

LiquidityWizard · 2026-01-06T17:38:13+00:00

The economic rent yield is an indicator of a company's return generated from total assets and can reflect operational efficiency. It differs from the financial rent yield, as the results may vary significantly due to different denominators. Investors should pay attention to the rent yield to accurately assess the company's profitability.

LiquidityWizard

2026-01-06 17:38:13

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What is the Economic Rent Rate, and Why Investors Cannot Ignore It?

If you want to know what the rent rate (ROI) is, simply put: you invest 100 yuan and earn back how much. But the reality isn’t that straightforward.

The economic rent rate measures the return generated by a company’s total assets. This indicator is crucial for stock selection because it directly reflects a company’s operational efficiency. Many investors often confuse it with other key metrics like PER or BPA, but the rent rate is unique—it can tell you how good a company is at “making money.”

ROI and Financial Rent Rate: Don’t Confuse Them Anymore

Many people tend to confuse these two concepts. The key difference is:

Economic Rent Rate = Profit ÷ Total Assets

Financial Rent Rate = Profit ÷ Shareholders’ Equity

It may seem like only the denominator differs, but the impact is significant. Depending on the company’s capital structure, these two indicators can be vastly different.

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