Return of Capital

Return of capital is a return from an investment that is not considered income. The return of capital effectively decreases the firm’s equity in the same manner that all distributions perform. It is a new transfer of value in the company to the proprietor. In an efficient market, the stock’s price tag will fall by a quantity equal to the particular distribution. Most companies fork out only a percentage of their income as returns. In some industries it’s quite to pay return of capital.