A tool exists that enables the calculation of the total return received from an asset or investment over the period it was held. This calculation incorporates all income received from the asset, such as dividends or interest, along with any appreciation in the asset’s price. For example, consider a stock purchased for $100 that pays a $5 dividend and is sold a year later for $110. This tool would compute the return generated by this investment, accounting for both the dividend income and the capital gain.
The utility of such a calculation lies in its ability to provide a clear, concise measure of investment performance over a specific time frame. This allows for a more accurate comparison of different investment options, regardless of their individual characteristics or payout schedules. Historically, determining investment performance could be cumbersome, requiring manual calculations. This type of calculation provides a standardized and readily available method for assessing investment returns.