Legal Definitions - net return

Net return refers to the final profit or gain realized from an investment, transaction, or activity after all associated costs, expenses, and deductions have been subtracted. It represents the actual amount of money or value an individual or entity keeps after accounting for all outlays.

• Example 1: Investment Portfolio

  Imagine an investor who purchased shares in a technology company for $5,000. After a year, they sold these shares for $6,500. During the holding period, they paid $50 in brokerage fees and incurred $100 in capital gains taxes on the profit. While the gross profit from the sale was $1,500 ($6,500 - $5,000), the investor's net return would be calculated by subtracting the fees and taxes: $1,500 - $50 - $100 = $1,350. This $1,350 is the actual profit the investor realized after all related costs.

• Example 2: Small Business Revenue

  A small online retailer sells handmade jewelry. In a particular month, they generate $2,000 in sales. However, to achieve these sales, they spent $400 on raw materials, $150 on shipping costs, $100 on website hosting fees, and $50 on marketing advertisements. The $2,000 represents their gross revenue. To determine their net return for the month, they subtract all these operational expenses ($400 + $150 + $100 + $50 = $700) from their gross revenue. Their net return is $2,000 - $700 = $1,300, which is the actual profit the business made after covering its costs.

• Example 3: Real Estate Transaction

  A homeowner sells their house for $400,000. They originally purchased it for $300,000. However, during the sale process, they paid $24,000 in real estate agent commissions, $3,000 in closing costs, and spent $5,000 on minor repairs to prepare the house for market. The gross profit from the sale is $100,000 ($400,000 - $300,000). To find their net return, they must subtract all the selling expenses ($24,000 + $3,000 + $5,000 = $32,000) from the gross profit. Their net return on the house sale is $100,000 - $32,000 = $68,000, representing the actual profit they walked away with after all costs associated with buying and selling.