What Is Fair Rate of Return?

The fair rate of return is a foreign management rate of return, which is the rate of profit that a utility company can obtain in order to pay interest and dividends and to purchase new plant equipment. Since the returns of utility companies are mostly formulated and adjusted according to the needs of management, determining a fair return is an important part of managing a utility company. In the United States, the regulatory committee considered factors in determining a fair rate of profit: the profit margin required by a utility company to attract capital, the profit margin obtained by an unregulated similar company, and the company's Cost of capital. There are also other important factors that can be considered, such as the company's operating conditions, tax situation and competition. In some U.S. states, the profitability of utility companies can increase or decrease depending on the effectiveness of the service. ^[1]

Fair rate of return

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The fair rate of return is a foreign management rate of return, which is the rate of profit that a utility company can obtain in order to pay interest and dividends and to purchase new plant equipment. Since the returns of utility companies are mostly formulated and adjusted according to the needs of management, determining a fair return is an important part of managing a utility company. In the United States, the regulatory committee considered factors in determining a fair rate of profit: the profit margin required by a utility company to attract capital, the profit margin obtained by an unregulated similar company, and the company's consistent Cost of capital. There are also other important factors that can be considered, such as the company's operating conditions, tax situation and competition. In some U.S. states, the profitability of utility companies can increase or decrease depending on the effectiveness of the service. ^[1]

Fair rate of return English: fair rate of return. U.S. state government limits on investment income for utility companies. This type of company is a government-sponsored sole operating agency, with sales restrictions subject to government restrictions. Its yield is designed to maintain the funds needed to provide services, guarantee shareholders' dividends and bond interest, and meet daily maintenance and business expansion.