Financial Statement Analysis
- Profitability Ratios
- Profitability Ratios Formula
- Common Size Income Statement
- Vertical Analysis of Income Statement
- Profit Margin
- Profit Margin Formula
- Profit Percentage Formula
- Profit Formula
- Gross Profit Margin Formula
- Gross Profit Percentage
- Operating Profit Margin Formula
- EBIT Margin Formula
- Operating Income Formula
- Net Profit Margin Formula
- EBITDA Margin
- Degree of Operating Leverage Formula (DOL)
- NOPAT Formula
- Earnings Per Share
- Basic EPS
- Diluted EPS
- Basic EPS vs Diluted EPS
- Return on Equity (ROE)
- Return on Equity Ratio
- Return on Capital Employed (ROCE)
- ROCE Formula (Return on Capital Employed)
- Return on Invested Capital (ROIC)
- Return On Investment (ROI)
- Rate of Return on Investment
- Return on Sales
- ROIC Formula (Return on Invested Capital)
- Return on Investment Formula (ROI)
- ROIC vs ROCE
- ROE vs ROA
- Cash on Cash Return
- Return on Total Assets (ROA)
- Return on Total Assets Formula
- Return on Average Capital Employed
- Capital employed Employed
- Return on Average Assets (ROAA)
- Return on Average Equity (ROAE)
- Return on Assets Formula
- Return on Equity Formula
- DuPont Formula
- Net Interest Margin Formula
- Earnings Per Share Formula
- Diluted EPS Formula
- Contribution Margin Formula
- Unit Contribution Margin
- Revenue Per Employee Ratio
- Operating Leverage
- EBIT vs EBITDA
- Capital Gains Yield
- Tax Equivalent Yield
- LTM Revenue
- Operating Expense Ratio Formula
- Overhead Ratio Formula
- Variable Costing Formula
- Capitalization Rate
- Cap Rate Formula
- Comparative Income Statement
- Capacity Utilization Rate Formula
- Total Expense Ratio Formula
- Markup Percentage Formula
- Ratio Analysis (17+)
- Liquidity Ratios (29+)
- Turnover Ratios (17+)
- Efficiency Ratios (7+)
- Dividend Ratios (9+)
- Debt Ratios (26+)
Capital Gains Yield is the increase in the value of an asset or portfolio because of the rise in the price of an asset (not the dividend paid because the owner has held the asset), combined with the dividend yield, capital gains yield gives the total yield i.e, profit because of holding an asset.
Capital Gains Yield Formula (Table of Contents)
Capital Gains Yield Formula: What is the formula?
We use capital gains yield formula when we want to know how much return we will get only on the basis of the appreciation or depreciation of a stock.
Here’s the formula for capital gains yield –
Here, P0 = price of the stock when we invested into it, and P1 = price of the stock after the first period.
Capital Gains Yield Formula Example
Let’s take a practical example to illustrate how we can do the Capital Gains Yield Calculation.
Ishita wants to see how much she has earned on a particular stock only on the basis of capital appreciation/depreciation. She has seen that when she has bought the stock, the price was $105. Now, after 2 years, the price of the stock has appreciated to $120 per share. What is the Capital Yield on that particular stock?
We can see that we have all the information Capital Gains Yield Calculation.
All we need to do is to put in the data into the formula for capital gains yield.
- Capital Gains formula = (P1 – P0) / P0
- Or, Capital Gains = ($120 – $105) / $105
- Or, Capital Gains = $15 / $105 = 1/7 = 14.29%.
That means, by using the this formula, we understand that Ishita got a 14.29% capital gains after 2 years of investment.
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If the company offers dividend, we can also calculate the dividend yield and find out the total return on investments.
Explanation of Capital Gains Yield Formula
Capital gains yield formula is used to find out whether the investors would get any return on the stock price. The formula for Capital gains yield uses the rate of change formula which is always used to find out the return on investments.
In this case, we will look at the beginning stock price and the stock price at the ending of first period. And then we will compare these two stock prices and find out the differences. Then we will find out the percentage of the differences on the basis of the beginning stock price.
Capital gains yield formula can also be crafted as –
We can derive this formula from the first formula only.
The first formula for Capital Gains Yield is –
- Or, Capital Gains formula = P1 / P0 – P0 / P0
- Or, Capital Gains formula = (P1 / P0) – 1
Use of Capital Gains Yield
For every investor, capital gains is an important measure.
Many companies don’t pay dividends. In that case, the investors can only get the capital gain yield as the return on investments.
Since capital gain yield can be positive as well as negative, it affects the total returns the investors get.
For example, if Mr A gets a total return of 25% on the stock, it can be the result of a negative capital yield of – 5% and a dividend yield of 30%.
So, here’s what we consider while calculating the total returns –
- Capital gain yield
- Dividend yield
We already know the capital gains yield calculation.
To calculate the dividend yield, we need to use the following formula –
Capital Gains Yield Calculator
You can use the following Capital Gains Yield Calculator
|Capital Gains Yield Formula=||
Capital Gains Yield in Excel (with Excel Template)
Let us now do the same example above in Excel.
This is very simple. All you need to do is to put in the data into the formula.
You can easily do the Capital Gains Yield Calculation in the template provided.
Capital Gains Yield Formula Video
This has been a guide to Capital Gains Yield Formula, practical examples, and Capital Gains Yield calculator along with excel templates. You may also have a look at these articles below to learn more about Financial Analysis –