Return on Investment
Return On investment
CONTENTS INTRODUCTION 6
The ROI Concept 6
Simple ROI for Cash Flow and Investment Analysis 7
Competing Investments: ROI From Cash Flow Streams 7
ROI vs. NPV, IRR, and Payback Period 10
Other ROI Metrics 11
LIST OF TABLES
Table 1 6
Table 2 7
Table 3 8
Table 4 8
Table 5 8
Table 6 ………………………………....................... 9 Table 7 ………………………………...................... 10
Return on Investment: What is ROI analysis?
Return on Investment (ROI) analysis is one of several commonly used approaches for evaluating the financial consequences of business investments, decisions, or actions. ROI analysis compares the magnitude and timing of investment gains directly with the magnitude and timing of investment costs. A high ROI means that investment gains compare favorably to investment costs.

In the last few decades, ROI has become a central financial metric for asset purchase decisions (computer systems, factory machines, or service vehicles, for example), approval and funding decisions for projects and programs of all kinds (such as marketing programs, recruiting programs, and training programs), and more traditional investment decisions (such as the management of stock portfolios or the use of venture capital).
The ROI Concept
Most forms of ROI analysis compare investment returns and costs by constructing a ratio, or percentage. In most ROI methods, an ROI ratio greater than 0.00 (or a percentage greater than 0%) means the investment returns more than its cost. When potential investments compete for funds, and when other factors between the choices are truly equal, the investment—or action, or business case scenario—with the higher ROI is considered the better choice, or the better business decision.
One serious problem with using ROI as the sole basis for decision making, is that ROI by itself says nothing about the likelihood that expected returns and costs will appear as predicted. ROI by itself,
CONTENTS INTRODUCTION 6
The ROI Concept 6
Simple ROI for Cash Flow and Investment Analysis 7
Competing Investments: ROI From Cash Flow Streams 7
ROI vs. NPV, IRR, and Payback Period 10
Other ROI Metrics 11
LIST OF TABLES
Table 1 6
Table 2 7
Table 3 8
Table 4 8
Table 5 8
Table 6 ………………………………....................... 9 Table 7 ………………………………...................... 10
Return on Investment: What is ROI analysis?
Return on Investment (ROI) analysis is one of several commonly used approaches for evaluating the financial consequences of business investments, decisions, or actions. ROI analysis compares the magnitude and timing of investment gains directly with the magnitude and timing of investment costs. A high ROI means that investment gains compare favorably to investment costs.

In the last few decades, ROI has become a central financial metric for asset purchase decisions (computer systems, factory machines, or service vehicles, for example), approval and funding decisions for projects and programs of all kinds (such as marketing programs, recruiting programs, and training programs), and more traditional investment decisions (such as the management of stock portfolios or the use of venture capital).
The ROI Concept
Most forms of ROI analysis compare investment returns and costs by constructing a ratio, or percentage. In most ROI methods, an ROI ratio greater than 0.00 (or a percentage greater than 0%) means the investment returns more than its cost. When potential investments compete for funds, and when other factors between the choices are truly equal, the investment—or action, or business case scenario—with the higher ROI is considered the better choice, or the better business decision.
One serious problem with using ROI as the sole basis for decision making, is that ROI by itself says nothing about the likelihood that expected returns and costs will appear as predicted. ROI by itself,