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What is Per Annum?

Per annum refers to a duration of one year, or on a yearly basis. The term is commonly used in regard to a sum due at intervals of one year or over the course of a year. As such, it is typically found in contracts involving the per annum amount of interest owed to a lender. It is a useful concept for translating a revenue or expense item generated or incurred over a short period of time into a standard annual unit of measure.

Examples of Per Annum

Several examples of how the per annum term is used are as follows:

• Expected cost. The per annum cost to maintain a car is $4,000; thus, a vehicle owner can be expected to pay out a total of $4,000 in maintenance costs for his automobile over a one-year period.

• Expected dividend payouts. A company declares that it will pay dividends of $2 per share per annum, split into quarterly payments.

• Expected growth rate. A company’s revenue is growing at an average rate of 8% per annum, indicating consistent yearly expansion.

• Expected salary. An employee is offered a salary of $70,000 per annum, indicating their total annual compensation before taxes and deductions.

• Expected sales. The per annum gross sales from a sales territory is $5 million; thus, a company's sales staff can expect to generate $5 million in sales per year that originate from a specific sales territory.

• Expected interest rate. The per annum interest rate charged on a credit card is 36%; this is derived from a 3% monthly rate that is charged on unpaid monthly balances (calculated as 3% x 12 months = 36% on a noncumulative basis).

• Expected subscription cost. A monthly magazine charges $5 per issue, so the per annum amount of a subscription is $60.

FAQs

Can per-annum metrics distort performance evaluation for instruments with irregular cash flows?

Yes. Per-annum metrics assume a uniform distribution of returns and can be misleading when cash flows are uneven or occur at irregular intervals. In such cases, annualized internal rates of return or time-weighted measures provide more accurate comparability across investments.

• Prospectus definition
• Net present value definition

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