Afkastahlutfall

Afkastahlutfall is a financial metric used in Nordic financial literature to express the profitability of an investment by comparing the gains generated to the amount invested. The term combines afkast (return or yield) with htlutfall (ratio), and is often translated as “return ratio” or “rate of return.”

Calculation and interpretation

The basic form of afkastahlutfall is often written as:

afkastahlutfall = (net gains from the investment) / (cost of the investment) × 100%

Net gains may refer to accounting profit, cash flow, or net income after taxes, depending on the context. Some applications use end-of-period gains, others use annualized figures to compare projects of different durations. In corporate finance, afkastahlutfall helps screen projects, compare opportunities, or communicate profitability to stakeholders.

Relation to other metrics

Afkastahlutfall is related to ROI but may differ in calculation details and emphasis. It is commonly used alongside other evaluative tools such as net present value (NPV), internal rate of return (IRR), and payback period. While a higher afkastahlutfall indicates greater profitability, it does not inherently account for risk, timing, or project scale.

Limitations

The metric can be sensitive to accounting choices, tax treatment, depreciation, and financing structure. A simple afkastahlutfall does not reflect the time value of money, cash flow timing, or risk differences across investments. Therefore, it is best used in conjunction with more comprehensive analyses.

See also

ROI, IRR, NPV, profitability index.