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Reverse Takeover (RTO): Definition and Overview A reverse takeover (RTO), also called a reverse merger, is a transaction in which a private company gains control of a publicly traded company—often a dormant or “shell” corporation—to become publicly listed without conducting a traditional initial public offering (IPO). RTOs are typically faster and less costly than IPOs…

Reverse Stock Split: What It Is and How It Works Key takeaways * A reverse stock split consolidates existing shares into fewer, proportionally higher-priced shares (e.g., a 1-for-10 split turns 10 shares into 1). * The company’s total market value (market capitalization) does not change solely because of the split. * Companies most often use…

Reverse Repurchase Agreement (Reverse Repo) A reverse repurchase agreement (reverse repo or RRP) is the seller’s side of a repurchase agreement. In a reverse repo, one party sells securities to another with a contractual promise to repurchase those securities at a higher price on a specified future date. Economically, it functions as a short-term, collateralized…

Reverse Morris Trust (RMT) A Reverse Morris Trust (RMT) is a tax-efficient transaction that lets a company divest unwanted assets or a business unit by spinning it off into a subsidiary and immediately merging that subsidiary with a third-party buyer. If structured to meet U.S. tax rules, the transaction can be completed without recognizing taxable…

Reverse Culture Shock Reverse culture shock is the emotional and psychological distress some people experience when returning home after an extended period abroad. What once felt familiar can seem strange, and readjusting to home norms, routines, and relationships can be unexpectedly difficult. Why it happens Globalization and increased international work or study assignments expose more…

Reverse Auction A reverse auction is a procurement method in which sellers compete to offer the lowest price to a buyer. The buyer defines the requirements, and multiple suppliers submit bids to win the contract by undercutting competitors. Reverse auctions are commonly used by governments and large organizations to lower costs and accelerate procurement, particularly…

Reversal: Definition, Examples, and Trading Strategies What is a reversal? A reversal is a sustained change in the direction of an asset’s price trend. An uptrend (series of higher highs and higher lows) reverses when it begins making lower highs and lower lows. A downtrend (series of lower highs and lower lows) reverses when it…

Revenue Recognition Revenue recognition is the accounting principle that determines when a company records revenue: when goods or services have been delivered (earned), not necessarily when cash is received. Applying this principle correctly ensures financial statements accurately reflect performance and prevents misleading results. How it works Revenue is recorded when a company fulfills its obligation…

Revenue Per User (RPU): Definition, Calculation, and Use Revenue per User (RPU), also commonly called Average Revenue per User (ARPU), measures the average revenue generated from each user, subscriber, or unit over a defined period. It’s a key metric for businesses that rely on recurring users—telecommunications, media, streaming, social platforms, and subscription services. Why RPU…

Revenue per Employee Revenue per employee is a financial-efficiency metric that estimates the average revenue generated by each full-time equivalent (FTE) employee in an organization. It helps assess how effectively a company converts its investment in labor into sales. Why it matters A higher revenue-per-employee figure generally indicates greater productivity and more efficient use of…

Revenue per Available Seat Mile (RASM) What RASM is Revenue per Available Seat Mile (RASM) measures how much operating revenue an airline generates for each seat (occupied or empty) flown one mile. It’s expressed in cents per available seat mile and reflects all recurring operating revenue sources, not just ticket sales. Why it matters Provides…

Revenue per Available Room (RevPAR) Revenue per available room (RevPAR) is a core performance metric in the hospitality industry. It measures how well a property fills its available rooms at an average rate and is widely used to benchmark performance over time and versus competitors. Key points RevPAR reflects revenue generated per available room, whether…

Revenue Passenger Mile (RPM) A revenue passenger mile (RPM) is a common transportation-industry metric—especially in airlines—that measures the total miles traveled by paying passengers. It quantifies traffic volume and helps airlines and regulators evaluate capacity utilization. How RPM is calculated RPM = number of paying passengers × distance flown Explore More Resources › Read more…

Revenue Officer A revenue officer is a government employee who enforces collection of delinquent taxes or fees by contacting individuals and businesses that owe money. Revenue officers work for federal, state, and local tax agencies (for example, the IRS in the United States or the CRA in Canada) and focus on resolving unpaid liabilities through…

Revenue Generating Unit (RGU): Definition, Measurement, and Use Key takeaways * A revenue generating unit (RGU) is a subscriber or service connection that produces recurring revenue for a company. * Telecom, cable, media, and internet-service companies commonly track RGUs and use them to evaluate growth, churn, and monetization. * Average revenue per unit (ARPU) =…

Revenue Deficit A revenue deficit occurs when actual net income falls short of projected net income or when revenue receipts are insufficient to cover revenue expenditures. It indicates that earnings are not enough to meet recurring operating costs and may require borrowing, asset sales, or spending cuts to cover the shortfall. Key takeaways A revenue…

Revenue Cap Regulation Revenue cap regulation limits the total revenue a firm can collect over a specified period. It is commonly applied to monopolistic or highly concentrated industries—most often utilities (electricity, gas, water)—where competition is limited and services are essential. How it works Regulators set a maximum allowable revenue for a firm (usually annually). Firms…

Revenue Bond Key takeaways A revenue bond is a municipal bond repaid from the income generated by a specific project (for example, tolls or utility fees), not from general tax revenues. Because repayment depends on a single revenue stream, revenue bonds typically carry higher risk and higher interest rates than general obligation (GO) bonds. Common…

Revenue Agent’s Report (RAR) What it is A Revenue Agent’s Report (RAR) is the detailed document an IRS examiner issues after an audit. It explains the examination’s findings, shows the calculations behind any proposed changes to income, credits, deductions, taxes, penalties, and interest, and indicates whether the taxpayer underpaid, overpaid, or paid the correct amount….

Revenue: Definition, Types, Recognition, and Calculation What is revenue? Revenue is the gross money a business or entity earns from its normal activities—primarily the sale of goods or services—before any expenses are deducted. It appears at the top of the income statement and is often called the “top line.” Key points: * Revenue measures sales…

Revealed Preference Revealed preference is an economic theory that infers a consumer’s preferences from their actual choices. Instead of measuring utility (a subjective, hard-to-quantify satisfaction), the theory uses observed purchasing behavior—holding incomes and prices constant—to determine what consumers prefer. Key takeaways * Choices reveal preferences when prices and income are fixed: if a consumer picks…

Revaluation reserve: what it is and how it’s recorded A revaluation reserve is a balance-sheet line used to reflect changes in the carrying value of long‑term assets when their fair value diverges materially from their book value. It helps companies track unrealized valuation changes (common for real estate or foreign‑currency–sensitive assets) without immediately distributing those…

Revaluation: Definition, Causes, and Economic Effects What is a revaluation? A revaluation is an upward adjustment of a country’s official exchange rate in a fixed-exchange-rate system. It raises the domestic currency’s value relative to a benchmark (another currency, a basket of currencies, gold, or wages). Revaluation is the opposite of devaluation, which lowers the official…

Returned Payment Fee: Definition, Causes, and How to Avoid What is a returned payment fee? A returned payment fee (also called a dishonored payment fee) is a one-time charge assessed when a payment is rejected by a payee’s bank or processor. This most commonly happens when a check bounces or an electronic payment is declined….

Return on Total Assets (ROTA) Return on Total Assets (ROTA) measures how effectively a company uses its assets to generate operating earnings. It compares earnings before interest and taxes (EBIT) to the company’s average total assets, isolating operating performance from financing and tax effects. Key points ROTA = EBIT / Average Total Assets Uses EBIT…

Return on Sales (ROS) Key takeaways * Return on Sales (ROS) measures how efficiently a company converts sales into operating profit. * Formula: ROS = Operating Profit (EBIT) / Net Sales. * Use ROS to compare companies within the same industry and to track efficiency trends over time. * ROS has limitations — especially for…

Return on Risk-Adjusted Capital (RORAC) Key takeaways * RORAC measures profitability relative to the capital exposed to risk: RORAC = Net Income / Risk‑Weighted Assets. * It helps compare projects or business units with different risk profiles by adjusting the capital denominator for risk. * Use RORAC alongside other metrics (ROE, RAROC, stress tests) because…

Return on Revenue (ROR): Definition, Formula, and Use Return on Revenue (ROR), also called net profit margin, measures the percentage of revenue that becomes net income. It shows how effectively a company turns sales into profit after accounting for all costs and expenses. Key takeaways ROR = Net income ÷ Sales revenue (expressed as a…

Return on Net Assets (RONA) Definition Return on Net Assets (RONA) measures how effectively a company uses its net assets to generate profit. It compares net profit to the assets actively deployed in operations, emphasizing tangible, operational resources rather than intangible or financing items. Formula RONA = Net Profit / (Fixed Assets + Net Working…

Return on Investment (ROI) Key takeaways * ROI measures the profit (or loss) from an investment relative to its cost and is expressed as a percentage. * Formula: ROI = (Current Value − Cost) / Cost. Multiply by 100 to express as a percent. * ROI is simple and versatile, useful for quick comparisons, but…

Return on Invested Capital (ROIC) Overview Return on Invested Capital (ROIC) measures how efficiently a company turns the money it has raised (debt and equity) into after-tax operating profit. It’s a key indicator of whether a company’s investments are creating value. Comparing ROIC to a company’s cost of capital (commonly WACC) shows whether capital deployment…

Return on Equity (ROE) Return on Equity (ROE) measures how efficiently a company uses shareholders’ equity to generate net income. Expressed as a percentage, it helps investors assess profitability and management effectiveness in converting equity financing into returns. Key takeaways ROE = Net Income ÷ Average Shareholders’ Equity. Higher ROE generally indicates more efficient use…

Return on Capital Employed (ROCE) Definition Return on capital employed (ROCE) measures how efficiently a company generates operating profit from the capital it uses. It’s a profitability metric that includes both equity and debt, making it useful for assessing capital-intensive businesses. Formula and calculation ROCE = EBIT / Capital Employed Explore More Resources › Read…

Return on Average Equity (ROAE) Return on Average Equity (ROAE) is a profitability ratio that measures how effectively a company uses its average shareholders’ equity to generate net income over a fiscal period (typically one year). It smooths out timing differences in equity changes by using the average of beginning and ending shareholders’ equity. Definition…

Return on Average Capital Employed (ROACE) What is ROACE? Return on Average Capital Employed (ROACE) measures how efficiently a company generates operating profit from the capital it has invested over a period. Unlike single-point measures, ROACE uses average capital across the period, which smooths seasonal or timing effects and gives a clearer view of capital…