Yield is the calculation of the earnings on an investment over a certain period of time. Yield is typically expressed as a percentage, and it shows how effective the investment has been.
The formula for yield is as follows:
Yield = Net Realized Return / Principal Amount
Typically, a higher yield signals a higher income and lessened risk, while a low yield signals less income and higher risk. However, yield is not an end-all be-all metric, as a company’s lowering stock value can sometimes be the cause for high yield.
While yield is used by investors and not necessarily an indicator for a business’s success, business owners should be aware of yield, if they have company investors.