What is a fair return rate?
The fair return rate is a reasonable profit based on operating costs and obligations for shareholders. This term usually arises in a regulatory context, when government officials want to control prices for the benefit of customers. Price checks can be observed with certain tools, rent and insurance fees depending on the opinion of the national regulatory bodies. The advocates of these policies claim to control the cost of making the services available to consumers, while critics believe that they are intervening the conditions of free market. Regulatory bodies usually look at operating costs, including wages, equipment maintenance and investment in business activities. For example, the electrical public service can be able to expand the capacity to serve customers, and may have to invest in new control systems to replace outdated equipment. Must have capital available to do it and relies on customers' fees to meet his needs. A fair return rate may be necessary to explainT that shareholders are favorable to those that are observed on stocks with similar companies. Public service shares tend to pay below the rest of the market, but offer more stable and reliable investments because they are less prone to volatility.
Similar calculations can be used to set price checks for real estate rent, usually in the interest of available housing available. Real estate owners must be able to maintain their assets and generate certain profits in order for the enterprise to be useful and for these needs to correspond to a fair return rate. The same problem is seen in insurance, where fees for subscribers of the fund's risk fund that the company uses to pay requirements, but must also generate profits to pay administrative costs and compensate shareholders.
economists with interest in pricing regulation have discussed a number of ways to calculate and evaluate the righteous mIra payback. The industries subject to this regulation usually play an active role in the process of creating rules to defend themselves. Individual companies may submit applications for control and resignation if they feel that the fair return rate determined by regulators does not meet their needs. For example, the landlord could apply for an increase in rent because of the serious weather conditions have led to a number of unexpected expenses not covered by insurance contracts.