Minimum return

The term minimum return denotes depending on the context

• the guaranteed return on an investment (e.g. in the case of guarantee funds ),
• the return target of a corporate strategy or
• the required return on an investment project , below which an investor does not invest or divest.

Minimum return as a guaranteed return

A large number of financial investments offer a capital guarantee or even guaranteed returns. It should be noted that such a guarantee is only as good as the creditworthiness of the guarantor.

Examples are:

• The maximum discount rate is the minimum return that German endowment insurance companies guarantee their customers.
• In addition to the capital repayment, guarantee funds often also guarantee a minimum return.
• Rent guarantees secure minimum returns for real estate buyers (for the risks, see real estate fraud ).

Minimum return as a return target

Companies often require a minimum return of 10 percent or 15 percent for their investments. Parts of the company that do not generate this return are shut down, relocated or sold. Such a minimum return serves as an operational control parameter.

Examples are:

• Siemens demands a minimum return of 8 percent.
• The Stinnes Group also requires a minimum return for its corporate divisions.
• For particularly risky investments, the desired minimum return is 30 percent.

Since goals have to be challenging, these minimum returns are typically above the current profitability and are therefore often missed as return targets.

Minimum return as required return

As part of the investment calculation, investors compare the expected returns on possible projects with a required return. The latter often corresponds to the weighted cost of capital . If the expected return is above the required rate, the project will be carried out, otherwise not.

Free economic perspective

The free economy intended by her's proposed free money to lower the minimum return.

See also

• Investment neutrality

Individual evidence

1. ↑ netzeitung.de mobile phone advertising campaign at Siemens ( memento from September 29, 2007 in the Internet Archive )
2. ↑ Annual Report 2002 ( Memento from September 22, 2003 in the Internet Archive ) www.stinnes.de ( PDF file )
3. ^ IV - State aid ( Memento of June 26, 2004 in the Internet Archive ) europa.eu.int ( PDF file )