1. In this definition, "stock" is used in its broadest economic sense.
A stock is contrasted with a flow, as recalled in proposal 4.2. Balance sheets are stock accounts. Assets and debts of household are, among other things, stocks, whereas incomes are, among others, flows.
2. Let's use the letter G, for gain, to algebraically denote an investment income or margin.
Profits are entirely income but income from savings in capital. Wages are also entirely income but income from labor. It is customary to call margin the difference between a sales flow measured at its price-value – the gross revenue – and this same flow measured at its value-cost – a cost-of-sales price. What is conventionally called value added is a margin81.
3. Margins are sometimes called contributions.
When the "cost-of-sales price" is the purchase cost of the commodities resold, the margin is often said to be gross82. When the cost considered is direct, qualifying the margin as direct is substantial. Benefits and losses are also margins.
4. Only a ratio between a revenue or margin G and an inventory S is a rate of return R such that R = G / S.
It follows from this definition that no relationship between an income or a margin and a flow is rate of return.
5. -A rate of profit on capital is a ratio of the family of rates of return.
The relationship between the income of the savings invested and the value attributed to these savings is also important. Return rates are also gross margin rates on average inventory and direct margin rates on direct assets.
6. Making the family of rate of return logically homogeneous avoids misunderstandings and errors.
X says that over the long term, the rate of return of enterprises decreases. Y asserts that this tendency is, on the contrary, towards stability. Both may be right... and wrong to be wrong. When X talks about the return of enterprises, the rate he is thinking of is benefit on gross revenue while for Y the rate he is thinking of is also benefit, but on capital or assets.
7. Very famous economists have predicted the tendency of the rates of profit to fall.
Learned discussions on this point have remained unresolved because of definitions that are not definitions. The asymptotic fall in the rate of profit on sales does not exclude the stability of the rates of profit on capital.
8. In other words, an enterprise where, as is still very common, we do not force ourselves to the unequivocal use of the concept of rate of return.
The margin rate on gross revenue for activity A is significantly lower than for activity B. It is better to get rid of activity A, according to management, in order to increase the enterprise's rate of return. In reality, in the unequivocal sense given here to the concept of rate of return , and as often happens, it is the direct rate of return of activity A that is greater than that of activity B.
9. Many decisions, with serious consequences, particularly on employment, are taken with regard to rate of return.
Unfortunately, this does not mean that it is almost always an element of the rate of return set when this set satisfies what a definition in mathematical logic is (proposition 1.1 For both theoretical and practical purposes, however, it is necessary, otherwise economic reality is neither observed nor treated for what it is on a key point.
10. Let us make use of what the French language has bequeathed to us that is economically insightful.
In French, a rate of return refers to the annuity that is close to the value attributed to the placements in savings that provides this annuity. This reconciliation constitutes a relative value, which can always be expressed as a percentage per year. This relative value is, so to speak, the parent of rate of return in Objective Political Economy and good management.