There are various definitions of the net rate, depending on in which sphere it is used. In economics, it is the rate of interest a person receives on his or her savings account after tax, especially after twenty percent of the basic rate tax, which is known as Value Added Tax, or as the abbreviation VAT, has been taken away. A net rate of interest can be presented by some banks and organizations with the use of a website or a piece of literature. Similar to a gross rate, the net rate presents what a person may receive while creating his or her savings account.
Calculating the price
The net rate can also be described as the price without the commission of the organization or person that offers something for the customers. What is more, every distributor can increase this price with the margin  she or he wants to make, or a specific amount that is agreed in the contract.
In business, such as in hospitality industry, the occurrence of the net rate can be noticed as well. Moreover, in hospitality business there are various levels of rate. For example, the inventory of a room is purchased by some of the distributors of third party at prices which are subordinated to provision. The other ones insist on a lower price which does not include provisions. This rate can be described as a Net Rate. The partners of the distributors who are given the Net Rate are among the others:
- tour operators
- group bookers
- foreign incoming travel companies (also known as FIT companies)
- destination management companies (also known as DMC).
In tourism industry, the Net Rate can be described as the price without the provision given to the travel agent. It can be calculated very easily. A person has to subtract the provision from a sell or gross rate. For example, if the rate paid is a hundred dollars (without VAT) and the provision is twenty-five percent, the net rate is seventy-five dollars. These calculations are conducted in order to define the real revenue of a company, organization, person, etc.
The net rate can be also used in studying social phenomena, such as migration. The migration rate can be described as the difference between the amount of emigrants, that means people who leave a particular area and the amount of immigrants, id est people who come into the area during the period of one year. This rate is calculated with the use of a ratio and the mid-year population. In the case when more emigrate from a country than enter it, the negative net migration rate can be noticed. In the case when the number of emigrants and immigrants is equal, the net migration rate can be described as balanced. When the amount of emigrants is smaller than the number of immigrants, it can be said that a positive net migration rate happens. This positive net migration rates suggests that there are far fewer people who leave the area in comparison to those who enter it.
Net rate in statistics
The net rate can be also used in statistics. The net reproductive rate also known as the abbreviation R0. In general, it is the number of the average amount of progenies who or which are born by females of a particular species at specific age.
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- Khan, M., Jain, P. (2006) Management Accounting
- Net present value versus internal rate of return, economics-sociology.eu (2011)
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Author: Jakub Chmiel