Return on investment (ROI) is a financial ratio that compares the amount of income derived from an investment with the cost of the investment. ROI is known as a profitability ratio, because it provides information about management's performance in using the resources of the small business to generate income. ROI and other financial ratios can provide small business owners and managers with a valuable tool to measure their progress against predetermined internal goals, a certain competitor, or the overall industry. ROI is also used by bankers, investors, and business analysts to assess a company's use of resources and financial strength.To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
ROI= (gain From Investment-Cost of Investment)/Cost of Investment
Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken. read more…
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Tuesday, May 29, 2007
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